Should trinkle spend money to test the market

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Reference no: EM131559381

Trinkle Foods Limited of Canada has invented a new salt substitute, branded Odessa. Trinkle is deciding whether to spend 6-million Canadian dollars (C$) to test-market a new line of potato chips flavored with Odessa in Vancouver. Depending on the outcome, Trinkle may spend an additional C$50 million 1 year later to launch a full line of snack foods across Canada. If consumer acceptance in Vancouver is high, the company predicts that its full product line will generate net cash inflows of C$13 million per year for 10 years. If consumers respond less favorably, cash inflows from a nationwide launch is expected to be just C$5 million per year for 10 years. Trinkle’s cost of capital equals 15 percent. Should Trinkle spend money to test the market?

Reference no: EM131559381

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