Asked by Christa Preville on Jun 04, 2024
Verified
If the firm learns that the complicated technology can be made more stable with a few tweaks increasing the price to 15.5 million and increasing the probability of a launch to 50%.Given the new costs and probabilities of launch for the complicated software,which technology would the firm rather invest in now?
A) The simple voice-activated software
B) The complicated thought-activated software
C) Neither of the software
D) Need more information
Simple Voice-Activated Software
Software applications that operate or respond to verbal commands, simplifying user interaction and increasing accessibility.
Complicated Thought-Activated Software
Advanced software systems that can interpret and act upon user thoughts or neural signals.
New Costs
Newly incurred expenses that arise due to changes in operations, production, or market conditions.
- Examine the effects of possible variations in development costs and success rates on project selection decisions.
Verified Answer
0.3 * $50mil - $10mil = $5mil
And the EV for the simple technology was:
0.8 * $10mil - $2mil = $6mil
Therefore, the simple technology was the better choice.
However, with the new information, the EV for the complicated technology changes to:
0.5 * $50mil - $15.5mil = $9.5mil
Which is now higher than the EV for the simple technology. Therefore, the firm would rather invest in the complicated thought-activated software with the revised probabilities and cost.
Learning Objectives
- Examine the effects of possible variations in development costs and success rates on project selection decisions.
Related questions
If the Firm Learns That the Complicated Technology Can Be ...
Which Is the Most Accurate and Time-Consuming Estimating Method? Explain
Estimates in the Earliest Stages of Project Selection Are Usually ...
In Estimating Costs to Compare and Select Projects, Which of ...
Merritt Company Is Considering a New Project That Has a ...