【正文】 the assistant to the CFO, which strategy would you remend to your boss?Accounting BreakEven Analysis Price more aggressively: $1,300,000 + ( 180。 $1,200,000 = $680,000 Direct marketing: 180。 $5 million) / = $ million Go directly to the market. The marketing manager for a growing consumer products firm is considering launching a new product. To determine consumers’ interest in such a product, the manager can conduct a focus group that will cost $120,000 and has a 70 percent chance of correctly predicting the success of the product, or hire a consulting firm that will research the market at a cost of $400,000. The consulting firm boasts a correct assessment record of 90 percent. Of course going directly to the market with no prior testing will be the correct move 50 percent of the time. If the firm launches the product, and it is a success, the payoff will be $ million.Which action will result in the highest expected payoff for the firm? Focus group: $120,000 + 180。 $5 million = $ million Test marketing: NPV = $2 million + ( 180。 Describe how sensitivity analysis interacts with breakeven analysis.Sensitivity analysis can determine how the financial breakeven point changes when some factors (such as fixed costs, variable costs, or revenue) change.Answers to EndofChapter ProblemsQUESTIONS AND PROBLEMSDecision Trees Sony Electronics, Inc., has developed a new type of VCR. If the firm directly goes to the market with the product, there is only a 50 percent chance of success. On the other hand, if the firm conducts test marketing of the VCR, it will take a year and will cost $2 million.Through the test marketing, however, the firm is able to improve the product and increase the probability of success to 75 percent. If the new product proves successful, the present value (at the time when the firm starts selling it) of the payoff is $20 million, while if it turns out to be a failure, the present value of the payoff is $5 million. Should the firm conduct test marketing or go directly to the market? The appropriate discount rate is 15 percent. Go directly: NPV = 180。 Why is it important to perform a sensitivity analysis?Because it provides an analysis of the consequences of possible prediction or assumption errors. What are potential problems in using a decision tree?Potential problems 1) that a different discount rate should be used for different branches in the tree and 2) it is difficult for decision trees to capture managerial options. How can managers use the market to help them screen out negative NPV projects? Chapter 8: Strategy and Analysis in Using Net Present ValueConcept Questions Chapter 8 What are the ways a firm can create positive NPV.1. Be first to introduce a new product.2. Further develop a core petency to product goods or services at lower