A Firm Is Considering the Development of a New Technology

question 47

Essay

A firm is considering the development of a new technology with a declining probability of success in each research stage. The firm's researchers have estimated the probabilities at .35, .25, .15, .07, and .01 for the various stages. The profit the firm would receive for successful development is $100 million, while the cost of research in each period is $10 million. How many investment stages should the firm undertake before abandoning the project?

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Definitions:

Primary Data

Data collected firsthand by the researcher for a specific research purpose, through surveys, interviews, or experiments.

Sample Frame

A list or database from which a statistical sample is drawn for a research or survey.

Survey Research

A research method involving the collection of information from a sample of individuals through their responses to questions.

Content Analysis

A research technique used to systematically analyze the content of communication materials, such as texts, media, and documents, to identify patterns or themes.