Tuff Wheels has forecast the demand and the cost 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 bla Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. The following table contains th 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 $1,250,000 $200,000 G $400,000 $150,000 per year 60,000 per year $100 $205 8% 9 months 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.
Tuff Wheels has forecast the demand and the cost 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 bla Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. The following table contains th 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 $1,250,000 $200,000 G $400,000 $150,000 per year 60,000 per year $100 $205 8% 9 months 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.
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
Transcribed Image Text:Tuff Wheels has forecast the demand and the cost 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
Project Schedule
Kiddy Dozer
Development
Pilot testing
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.
Ramp-up
Marketing and
support
Production and
sales
$1,250,000
$200,000
$400,000
$150,000 per year
60,000 per year
9 months
Assume all cash flows occur at the end of each period.
Net present value
$100.
$205
8%
Year 1
Year 2
Year 3
Year 4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
a. What are the yearly cash flows and their present value (discounted at 8 percent) of this project? What is the net present value?
Note: 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.
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