Assignment:
You are about to launch a new product on the market. If it is a success you will make $16 million; otherwise, you lose $5 million. The probability of success is 65%. You could increase chances of success by delaying product launch in order to improve product design; this would take 6 months and would cost an additional $1 million. In order to account for the delay and the time value of money, we should discount cash flows at a rate of 3% (the rate refers to the 6-month period and is applied to profit/loss). What is the minimal improvement in success probability that makes the delay worthwhile?
Provide complete and step by step solution for the question and show calculations and use formulas.