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Development cost Estimated development time Pilot testing Ramp-up cost Marketing and support cost Sales and production volume Unit production cost Unit price Interest rate PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing $800,000 $200,000 $400,000 $150,000 per year 60,000 per year Ramp-up Marketing and Support Production and Sales $ Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. 9 months 100 160 YEAR I YEAR 2 YEAR 3 YEAR 4 0 0 0 0 0 0 ₂ Oy Of Of Q₂ Qy Of Of Qz Og Of

Development cost Estimated development time Pilot testing Ramp-up cost Marketing and support cost Sales and production volume Unit production cost Unit price Interest rate PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing $800,000 $200,000 $400,000 $150,000 per year 60,000 per year Ramp-up Marketing and Support Production and Sales $ Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. 9 months 100 160 YEAR I YEAR 2 YEAR 3 YEAR 4 0 0 0 0 0 0 ₂ Oy Of Of Q₂ Qy Of Of Qz Og Of

Essentials of Business Analytics (MindTap Course List)
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter12: Integer Linear Optimization_models
Section: Chapter Questions
Problem 3P: Spencer Enterprises is attempting to choose among a series of new investment alternatives. The...
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Development cost Estimated development time Pilot testing Ramp-up cost Marketing and support cost Sales and production volume Unit production cost Unit price Interest rate PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing Ramp-up Marketing and Support Production and Sales Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. Net present value NPV 50,000 NPV 70,000 Assume all cash flows occur at the end of each period. a. What is the net present value (discounted at 8%) of this project? Consider all costs and expected revenues. (Enter your answer In thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) $ (11,249,000) NPV 9% NPV 10% $800,000 $200,000 $400,000 $150,000 per year 60,000 per year 9 months YEAR 1 YEAR 2 YEAR 3 YEAR 4 Q₂ Q₂ Q3 Q Q Q₂ Q3 Q Q Q₂ Qq Of Of Q₂ Q3 Q4 S $ $ 100 $ 160 b. What is the impact on NPV for the Kiddy Dozer if the actual sales are 50,000 per year? 70,000 per year? (Enter your answer in thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) 0 0 8 % $ (11,254,000) $ (10,173,000) c. Based on the original sales level of 60,000, what is the effect on NPV caused by changing the discount rate to 9%, 10%, or 11%? (Enter your answer in thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) < Prev
Transcribed Image Text:Development cost Estimated development time Pilot testing Ramp-up cost Marketing and support cost Sales and production volume Unit production cost Unit price Interest rate PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing Ramp-up Marketing and Support Production and Sales Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created. Net present value NPV 50,000 NPV 70,000 Assume all cash flows occur at the end of each period. a. What is the net present value (discounted at 8%) of this project? Consider all costs and expected revenues. (Enter your answer In thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) $ (11,249,000) NPV 9% NPV 10% $800,000 $200,000 $400,000 $150,000 per year 60,000 per year 9 months YEAR 1 YEAR 2 YEAR 3 YEAR 4 Q₂ Q₂ Q3 Q Q Q₂ Q3 Q Q Q₂ Qq Of Of Q₂ Q3 Q4 S $ $ 100 $ 160 b. What is the impact on NPV for the Kiddy Dozer if the actual sales are 50,000 per year? 70,000 per year? (Enter your answer in thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) 0 0 8 % $ (11,254,000) $ (10,173,000) c. Based on the original sales level of 60,000, what is the effect on NPV caused by changing the discount rate to 9%, 10%, or 11%? (Enter your answer in thousands of dollars. Perform all calculations using Excel. Do not round any Intermediate calculations. Round your answer to the nearest thousand.) < Prev
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