Problem $7-7$ Decision Trees

The manager for a growing firm is considering the launch of a new product. If the product goes directly to market, there is a $50$ percent chance of success. For $$184,000$ the manager can conduct a focus group that will increase the product$$s chance of success to $65$ percent. Alternatively, the manager has the option to pay a consulting firm $$399,000$ to research the market and refine the product. The consulting firm successfully launches new products $80$ percent of the time. If the firm successfully launches the product, the payoff will be $$1\mathrm{.}99$ million. If the product is a failure, the NPV is zero. Calculate the NPV for each option available for the project. $($Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e$.$g$.,1,234,567.)$

Which action should the firm undertake?

multiple choice

Go to market now

Consulting firm

Focus group