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Business, 29.04.2021 21:00 seema12

has developed a new gadget. If the gadget is successful, the present value of the payoff (at the time the product is brought to market) is $21 million. If the gadget fails, the present value of the payoff is $8 million. If the gadget goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.2 million to test-market the gadget. Test-marketing would allow the firm to improve the gadget and increase the probability of success to 75%. The appropriate discount rate is 10%. Should the firm conduct test-marketing

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has developed a new gadget. If the gadget is successful, the present value of the payoff (at the tim...
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