The launch of Sony’s PlayStation 3 was delayed until November 2006, giving Microsoft’s Xbox 360 a full year on the market without competition. Sony did not repeat this mistake in 2013 when PS4 launched at the same time as Xbox One. Imagine that it is November 2005 and you are the marketing manager for the PlayStation. You estimate that if PlayStation 3 were ready to be launched immediately, you could sell

$2 billion worth of the console in its first year. However, if your launch is delayed a year, you believe that Microsoft’s head start will reduce your first-year sales by 20% to $1.6 billion. If the interest rate is 8%, what is the cost of a delay of the first year’s revenues in terms of dollars in 2005?