The Consumer-Mart Company Is Going to Introduce a New Consumer

Multiple Choice

The Consumer-Mart Company is going to introduce a new consumer product.If brought to market without research about consumer tastes the firm believes that there is a 60% chance that the product will be successful.If successful,the project has a NPV = $500,000.If the product is a failure (40%) and withdrawn from the market,then NPV = -$100,000.A consumer survey will cost $60,000 and delay the introduction by one year.With a survey,there is an 80% chance of consumer acceptance,in which case the NPV = $500,000.If,on the other hand the product is a failure (20%) and withdrawn from the market,then NPV = -$100,000.The discount rate is 10%.By how much does the marketing survey change the expected net present value of the project?

A) increases the NPV by $25,455
B) decreases the NPV by $5950
C) increases the NPV by $8955
D) decreases the NPV by $25,455