Question

Transcendent Technologies is deciding between developing a complicated thought-activated software, or a simple voice-activated software. Since the thought-activated software is complicated, it only has a 30% chance of actually going through to a successful launch, but would generate revenues of $50 million if launched. The voice-activated software is simple and hence has a 80% chance of being launched but only generates a revenue of $10 million. If the complicated technology costs $10 million to develop while the simple technology costs $2 million to develop, which technology is more profitable to develop? Explain briefly.a. The simple voice-activated softwareb. The complicated thought-activated softwarec. Neither of the softwared. Need more information

Answer 1

a. The simple voice-activated software

The return on investment (ROI) is much higher for the voice activated software, which means that investors will receive much higher returns per dollar invested than the other alternative. Investors can expect to receive $4 for every $1 invested in this technology.

Step-by-step explanation:

thought-activated software

required investment = $10 million

expected benefits = $50 million x 30% chance = $15 million

return on investment = $15 million / $10 million = 1.5

voice-activated software

required investment = $2 million

expected benefits = $10 million x 80% chance = $8 million

return on investment = $8 million / $2 million = 4