Assignment:
Q: The Tuff Wheels was getting ready to start its development project for a new product to be added to their 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 table below contains the relevant information for this project.
|
Development cost
|
$
|
1,450,000
|
|
|
Estimated development time
|
|
9
|
months
|
|
Pilot testing
|
$
|
200,000
|
|
|
Ramp-up cost
|
$
|
400,000
|
|
|
Marketing and support cost
|
$
|
150,000
|
per year
|
|
Sales and production volume
|
|
60,000
|
per year
|
|
Unit production cost
|
$
|
100
|
|
|
Unit price
|
$
|
225
|
|
|
Interest rate
|
|
8
|
%
|
What is the impact on NPV for the Kiddy Dozer if the actual sales are 50,000 per year? $70,000 per year?