Adequate information:
Cash flow for success (CS) = $1,900,000
Cash flow for failure (CF) = $0
Probability of success when the product goes directly to market = 0.50
Probability of failure when the product goes directly to market = 0.50
Probability of success in case of using the focus group technique = 0.65
Probability of failure in case of using the focus group technique = 0.35
Probability of success in case of using the technique of research of a consulting firm = 0.80
Probability of failure in case of using the technique of research of a consulting firm = 0.20
Cost of conducting research = $345,000
To determine: The action that will result in the highest expected payoff to the firm.
Introduction:
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Corporate Finance
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