You are about to launch a new product on the market. If it is a success you
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You are about to launch a new product on the market. If it is a success you will make $16 million; otherwise, you lose $5 million. The probability of success is 65%. You could increase chances of success by delaying product launch in order to improve product design; this would take 6 months and would cost an additional $1 million. In order to account for the delay and the time value of money, we should discount cash flows at a rate of 3% (the rate refers to the 6-month period and is applied to profit/loss). What is the minimal improvement in success probability that makes the delay worthwhile?
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Related Book For
Quantitative Methods An Introduction For Business Management
ISBN: 1579
1st Edition
Authors: Paolo Brandimarte
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