A firm estimates that the net present value of future cash flows from a new product will be $125,000. The firm estimates that they will spend $135,000 on product development and research. Based on these figures, what should the firm do?
A) Develop the product
B) Not develop the product
C) Release the product to market immediately
D) Cannot be determined from the information given

Question

Quizplus · Accepted Answer

Based on the information given, the estimated net present value of future cash flows is less than the estimated cost of product development and research. Therefore, the firm should not develop the product.

A Firm Estimates That the Net Present Value of Future