B&B has a new baby powder ready to market. If the firm goes directly t

QUESTION

B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only 60 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $750,000. By going through research, B&B will be able to b
Assumption: I considered innitial selling as 60% success $28 million profit.Company should conduct customer segment research, because with out research company can get only $28 Million of profit, but if we research conducted this profit is $30.5 Million. So we can get additional $2.5 million profit with research. Profit at the time of initial selling It means at 60% Success = 28 Million for 75% = 28 * 75/60 = 35 Million For

getting this 35 million we have to spent $750,000 and one year. Additional Cash Flow Discount Rate 12% Present Value $35,000,000 0.892857143 ( 1/1.12^1) $31,250,000 Less Expenditure for research $750,000 $30,500,000 Profit at 60% $28,000,000 Additional Profit $2,500,000 Thank you

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