Transcendent Alternatives Transcendent Technologies is deciding between developing complicated, thought-activated software, or simple, voice-activated software. The voice-activated software would cost $50 million to develop and has a 60% chance of being
successfully launched and generating revenue of $100 million. The thought-activated software would be a bonanza if successful, generating $1 billion in revenue. But it is so complicated, it is projected to cost would be $400 million. How likely would success have to be for Transcendent Technologies to opt for the thought-activated software?
Expected profits from the voice-activated software are 0.6*($100 million) - $50 million = $10 million. If successful, profits from the thought-activated software would be $1 billion(X) - $400 million >= $10M. So the required probability of success would have to be $410 million / $1000 million = 0.41 or higher in order for the expected profits from the thought-activated software to exceed the alternative.
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