Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the...

Transcribed Image Text:

Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $34.6 million. If the mesh network falls, the present value of the payoff is $12.6 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.36 million to test market the mesh network. Test marketing would allow the firm to improve the product and Increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Go to market now Test marketing first Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $34.6 million. If the mesh network falls, the present value of the payoff is $12.6 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.36 million to test market the mesh network. Test marketing would allow the firm to improve the product and Increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Go to market now Test marketing first

Answer rating: 100% (QA)

Calculating NPV for Going Directly to Market Option 1 Success Probability 50 Payoff on Success 346 m... View the full answer