The manager for a growing firm is considering launching a new product. If the product goes directly to market, there is a 60 percent chance of success. For $182,000, the manager can conduct a focus group that will increase the products chance of success to 75 percent. Alternatively, the manager has the option to pay a consulting firm $397,000 to research the market and refine the product. The consulting firm successfully launches new products 90 percent of the time. If the firm successfully launches the product, the payoff will be $1.97 million. If the product is a failure, the NPV is zero.

a. Calculate the NPV for each option available for the project. (Do not round intermediate calculations. Enter the answers in dollars, not millions of dollars. Omit $ sign in your response.)

	NPV
Go to market now	$
Focus group	$
Consulting firm	$

b. Which action will result in the highest expected payoff to the firm?

multiple choice

• Go to market now

• Consulting firm

• Focus group