The Consumer- Mart Company Is Going to Introduce a New

question 72

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 If the product is a failure (40%) and withdrawn from the market, then NPV = -$100,000.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. If the survey is successful, then there is an 80% chance of consumer acceptance, in which case the NPV =
$500,000. If, on the other hand the survey is a failure, 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? (approximately)

• A) Increase the NPV by $25,455
• B) decrease the NPV by $5950
• C) decrease the NPV by $8955
• D) decrease the NPV by $25,455

---

Definitions:

Pure Monopsonist

A market condition where there is only one buyer for a product or service, giving this buyer significant control over the market.

Market Equilibrium Wage

The market equilibrium wage is the rate of compensation for labor where the quantity of labor supplied by workers matches the quantity of labor demanded by employers, resulting in no excess supply or demand in the job market.

Industrial Union

A method of labor union organization in which workers from a specific industry are unified into a single union, irrespective of their individual skills or trades.

Right to Work Laws

Laws that prohibit union security agreements between companies and workers' unions, preventing mandatory union membership for employment.