a. What is the
b. Perot’s engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented?
c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated.
Development cost - $1,250,000
Estimated development time - 9 months
Pilot testing - $200,000
Ramp-up cost - $400,000
Marketing and support cost - $150,000/yr
Sales & Production volume - $60,000/yr
Unit production cost - $100
Unit price - $205
Interest rate - 8%
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