The Kazin Corporation is introducing a new product, which it can distribute initially either in the state of Georgia or in the entire Southeast. If it distributes in Georgia alone, plant and marketing will cost $5 million, and Kazin can reevaluate the project at the end of 3 years to decide whether to go regional. To go regional at the end of the 3 years would cost another $10 million. To distribute regionally from the outset would cost $12 million. The risk-free rate is 4 percent. In either case, the product will have a life of 6 years, after which the plant will be worthless. Given the graphical information in Figure 7-8 and the following data, what policy should Kazin adopt?
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