PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing Ramp-up Marketing and Support Production and Sales YEAR I YEAR 2 YEAR 3 YEAR 4 QGQQGQ Q] [[]] [[G] [[Q Q Q Q Q Q Q 4] 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 an in thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your ans to the nearest thousand.) Net present value 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 Pound your answer to

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Chapter1: Financial Statements And Business Decisions
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The Tuff Wheels was getting ready to start its development project for a new product to be added to its small motorized vehicle
line for children. The new product is called the Kiddy Dozer. It will look like a miniature bulldozer, complete with caterpillar tracks
and a blade. Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. The following
table contains the relevant information for this project.
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
$950,000
9 months
$200,000
$400,000
$150,000 per year
60,000 per year
$
$
100
175
8 %
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.
Transcribed Image Text:The Tuff Wheels was getting ready to start its development project for a new product to be added to its small motorized vehicle line for children. The new product is called the Kiddy Dozer. It will look like a miniature bulldozer, complete with caterpillar tracks and a blade. Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. The following table contains the relevant information for this project. 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 $950,000 9 months $200,000 $400,000 $150,000 per year 60,000 per year $ $ 100 175 8 % 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.
PROJECT SCHEDULE
KIDDY DOZER
Development
Pilot Testing
Ramp-up
Marketing and Support
Production and Sales
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 an
in thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your ans
to the nearest thousand.)
Net present value
YEAR I
YEAR 2
YEAR 3
YEAR 4
Q1 Q₂ Q3 Q Q Q₂ Q3 Qq Q1 Q₂ Q3 Q₂ Q1 Q₂ Q3 Q4
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.)
NPV 50,000
NPV 70,000
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.)
NPV 9%
NPV 10%
NPV 11%
Transcribed Image Text:PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing Ramp-up Marketing and Support Production and Sales 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 an in thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your ans to the nearest thousand.) Net present value YEAR I YEAR 2 YEAR 3 YEAR 4 Q1 Q₂ Q3 Q Q Q₂ Q3 Qq Q1 Q₂ Q3 Q₂ Q1 Q₂ Q3 Q4 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.) NPV 50,000 NPV 70,000 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.) NPV 9% NPV 10% NPV 11%
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