Should they roll out the product this year or next year

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Question - Williams Industries is considering launching a new product. They estimate that if they launch the new product this year it will have a value of $120 million over its lifetime. 15% percent of the value of the product is attributable to the value of the these cash flows in the first year. Williams has the option to wait one year to launch the toy, however, the demand next year will depend on what other products competitors introduce so there is greater uncertainty about next year's demand. The volatility of the product value is 30% per year. Launching the product will involve a total capital expenditure of $100 million. The risk-free rate is 5%.

1) Should they roll out the product this year or next year?

2) What would he the highest volatility where they would launch this year?

Reference no: EM133185343

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