The Consumer-Mart Company is going to introduce a new consumer product. If brought to market without research
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Question:
The Consumer-Mart Company is going to introduce a new consumer product. If brought to market
without research about consumer tastes the firm believes that there is a 60% chance that the product
will be successful. If successful, the project has a NPV = $500,000. If the product is a failure (40%) and
withdrawn from the market, then NPV = -$100,000. A consumer survey will cost $60,000 and delay the
introduction by one year. With a survey, there is an 80% chance of consumer acceptance, in which case
the NPV = $500,000. If, on the other hand the product is a failure (20%) and withdrawn from the market,
then NPV = -$100,000. The discount rate is 10%. By how much does the marketing survey change the
expected net present value of the project?
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