Conducts customer segment research

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Reference no: EM131597941

B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.15 million. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $18.5 million. If unsuccessful, the present value payoff is only $5.5 million. The appropriate discount rate is 15 percent.

Calculate the NPV for the firm if it conducts customer segment research, and if it goes to market immediately.

NPV

Market immediately $

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Reference no: EM131597941

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