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Calculate the npv for each option available for the project

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Problem - The manager for a growing firm is considering launching a new product. If the product goes directly to market, there is a 50 percent chance of success. For $175,000, the manager can conduct a focus group that will increase the product's chance of success to 65 percent. Alternatively, the manager has the option to pay a consulting ?rm $390,000 to research the market and re?ne the product. The consulting ?rm successfully launches new products 80 percent of the time. If the ?rm successfully launches the product, the payoff will be $1.9 million. If the product is a failure, the NPV is zero.

Calculate the NPV for each option available for the project.

Which action will result in the highest expected payoff to the ?rm?

Reference no: EM133008131

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