Bampb has a new baby powder ready to market if the firm, Ask an Expert

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B&B has a new baby powder ready to market. If the firm goes directly to the market with the product, there is only a 60 percent change of success. However, the firm can conduct customer segment research, which will take a year and cost $600,000. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 75 percent. If successful, the baby powder will bring a present value profit at time of initial selling of $27 million. If unsuccessful, the present value profit is only $5 million. Should the firm conduct customer segment research or go directly to market? The appropriate discount rate is 12 percent.

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Financial Management, Finance

Category:- Financial Management
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