A food industry company has a new product to introduce. This time the firm will test...
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A food industry company has a new product to introduce. This time the firm will test Market the product for one year before full scale operations begin. The one year test will require and investment of $250,000 at time zero. There is a 70% chance that the test will be a success. In this event, the firm proceed with investing $500,000 at time 1 Which will return $235,000 per year for 5 years. If the test is a failure, the company will salvage its initial investment for $ 75,000 the appropriate discount rate for the project is 12% however, the initial test marketing period (period 1) is considered riskier and the company believes a 20% rate should be used. Should the company go ahead with the test marketing phase of the project ?show calculations. A food industry company has a new product to introduce. This time the firm will test Market the product for one year before full scale operations begin. The one year test will require and investment of $250,000 at time zero. There is a 70% chance that the test will be a success. In this event, the firm proceed with investing $500,000 at time 1 Which will return $235,000 per year for 5 years. If the test is a failure, the company will salvage its initial investment for $ 75,000 the appropriate discount rate for the project is 12% however, the initial test marketing period (period 1) is considered riskier and the company believes a 20% rate should be used. Should the company go ahead with the test marketing phase of the project ?show calculations.
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Heres how to evaluate whether the company should proceed with the test marketing phase 1 Calculate t... View the full answer
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date:
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