- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Hello, the company could purchase market research information (with perfect accuracy) at a cost of $4 500. EV of profit without this information is $34 000 and EV of profit with this perfect information is $ 40 000. What is the value to the company of obtaining this perfect market research information? The answer states $1 500 (40 000 – 34 000 – 4 500). Why it’s not simply $6 000 (from the definition – value of perfect info is the difference between EV with information and EV without it). Thank you.
The perfect information itself does have a value of 6,000.
However, the value to the company is 1,500 because they have to pay 4,500 in order to get the benefit of the 6,000. 6,000 is the most they would be prepared to pay, the less they pay then the more benefit they end up getting.
- You must be logged in to reply to this topic.