Problemyou are considering making a hillary action figure, Ask an Expert

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Problem:

You are considering making a "Hillary" action figure to capitalize on popular political fever. Production will cost $5 million. If political fever strikes, you will sell action figures worth $20 million (in present value (PV)). If voters do not catch the political fever, you will only sell action figures worth $2 million (in PV) as only loyal Democrats will buy. Each possibility has a 50% chance. However, before production begins, you can conduct a marketing survey to determine which scenario will happen. The survey costs $1 million. Is it worth conducting the survey? Why?

A. Do not conduct the survey as the NPV with a survey = $5 million.

B. Conduct the survey as the NPV with a survey = $6.5 million.

C. Do not conduct the survey as the NPV without a survey = +$6 million.

D. Do not conduct the survey as the NPV with a survey = $4 million.

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Category:- Basic Finance
Reference No.:- M91175102

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