QUESTION TWO (20 points) (a) B&B has a new baby powder ready to market. If...
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QUESTION TWO (20 points) (a) 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 55 percent chance of success. However, the firm can conduct customer segment research, which will take a year and cost $1.8 million. By going through research, B&B will be able to better target potential customers and will increase the probability of success to 70 percent. If successful, the baby powder will bring a present value profit (at time of initial selling) of $28 million. If unsuccessful, the present value payoff is only $4 million. (15 Points) Should the firm conduct customer segment research or go directly to market? The appropriate discount rate is 15 percent. (b) Draw a decision tree to show top management your work? (5 Points)
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