Conducts customer segment research

Assignment Help Financial Management

Reference no: EM131936557

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 $1.18 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 $18.8 million. If unsuccessful, the present value payoff is only $5.8 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. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

NPV

Market immediately $

Research option $

Should the firm conduct customer segment research or go to the market immediately?

Conduct research

Market immediately

Reference no: EM131936557

Questions Cloud

Why the simple rate of return may provide a misleading : Calculate both the Payback Period, and the Simple Rate of Return for this proposed investment, AND explain why the simple rate of return may provide.

How these decisions are contrasted to non-international : Discuss within the context of how these decisions are contrasted to non-international financial challenges.

Stamp duty on transfer and transfer stamp duty : What is the difference between stamp duty on transfer and transfer stamp duty?

What will be new equilibrium price : What will be Cella, Inc's new equilibrium price if its covariance with the market portfolio doubles, but everything else (including the dollar-value).

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

What type of option is a healthcare insurance : What kind of behavior do you expect to see by healthcare providers and consumers based on the information above and for the different plan types?

What is the required return on equity relevant : You are considering purchasing supermarket business (like Woolworths) but your business will target a Debt-to-equity of 1 to 1.29 (i.e 1:/1.29).

What will be concrete marginal cost on common equity : Assume that All Concrete Construction Inc. has established a target capital structure of 40 percent debt and 60 percent common equity.

On the basis of your own ideas what is your conclusion : Based on the few suggestions offered in this chapter and on the basis of your own ideas, what is your conclusion?

User Account

All Pages