Ang Electronics has developed a new DVDR. If the DVDR is successful, the present value of the pay-off (when the product is brought to market) is £20 million. If the DVDR fails, the present value of the pay-off is £5 million. If the product goes directly to market, there is a 50 per cent chance of success. Alternatively, Ang can delay the launch by one year and spend £2 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 75 percent.

The appropriate discount rate is 15 per cent. Should the firm conduct test marketing?