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 $1,550,000 9 months $ 200,000 $ 400,000 $ 150,000 per year 60,000 per year $ 100 $ 235 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. YEAR 2 YEAR 3 YEAR 4 QQQQQ z Q Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 PROJECT SCHEDULE YEAR 1 KIDDY DOZER Q1 Q2 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 answer in thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your answer to the nearest thousand.) Net present value
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 $1,550,000 9 months $ 200,000 $ 400,000 $ 150,000 per year 60,000 per year $ 100 $ 235 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. YEAR 2 YEAR 3 YEAR 4 QQQQQ z Q Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 PROJECT SCHEDULE YEAR 1 KIDDY DOZER Q1 Q2 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 answer in thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your answer to the nearest thousand.) Net present value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
None
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
$1,550,000
9 months
$ 200,000
$ 400,000
$
150,000 per year
60,000 per year
$
100
$
235
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.
YEAR 2
YEAR 3
YEAR 4
QQQQQ z Q Q Q2 Q3 Q4 Q1 Q2 Q3 Q4
PROJECT SCHEDULE
YEAR 1
KIDDY DOZER
Q1 Q2
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 answer in
thousands of dollars. Perform all calculations using Excel. Do not round any intermediate calculations. Round your answer to the
nearest thousand.)
Net present value
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education