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Omega Company has developed a new gadget. If the gadget is successful, the present value of the payoff ( at the time the product is

Omega Company has developed a new gadget. If the gadget is successful, the present value of the payoff (at the time the product is brought to market) is $21 million. If the gadget fails, the present value of the payoff is $8 million. If the gadget goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.10 million to test-market the gadget. Test-marketing would allow the firm to improve the gadget and increase the probability of success to 75%. The appropriate discount rate is 12%. Should the firm conduct test-marketing?
No, because NPV is lower by $237,588
No, because NPV is lower by $188,974
Yes, because NPV is higher by $469,862
D. Yes, because NPV is higher by $377,850
E. Yes, because NPV is higher by $248,214

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