Should Ang Electronics, Incorporated Conduct Test Marketing for the New Mesh Network?

Question:

Should Ang Electronics, Incorporated conduct test marketing for their new mesh network before bringing it to market?

Answer:

Yes, Ang Electronics, Incorporated should conduct test marketing for their new mesh network before bringing it to market. The decision should be based on the Net Present Value (NPV) calculation for both scenarios: going to market directly and conducting test marketing first.

Net Present Value Calculation:

Going to Market Directly:
If the company chooses to sell the product directly to the market with a 40% success rate, the NPV calculation is as follows:
NPV = -$34,800,000 x 0.6 + $12,800,000 x 0.4 / (1 + 12%)
NPV = -$20,880,000 + $5,120,000 / 1.12
NPV = $1,337,714

Conducting Test Marketing First:
If the company decides to delay the launch by a year, spend $1.38 million on test marketing, and improve the product to increase the success rate to 70%, the NPV calculation is as follows:
NPV = [($34,800,000 x 0.7 + $12,800,000 x 0.3) - $1,380,000] / (1 + 12%)
NPV = [$24,360,000 + $3,840,000 - $1,380,000] / 1.12
NPV = $11,578,859

Based on the NPV calculations, the firm should conduct test marketing as the NPV of test marketing ($11,578,859) is higher than the NPV of selling directly to the market ($1,337,714). Therefore, the answer is Yes, Ang Electronics, Incorporated should conduct test marketing for their new mesh network.