1. Business
  2. Accounting
  3. the tuff wheels was getting ready to start its development...

Question: the tuff wheels was getting ready to start its development...

Question details


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 Estimated development time Pilot testing Ramp-up cost Marketing and support cost Sales and production volume Unit production cost Unit price Interest rate $900,000 $200,000 $150,000 per year 4001000 onthe $400,000 60,000 per year 100 170 Tuff Wheels also has provided the project plan shown below. 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 PROJECT SCHEDULE KIDDY DOZER Development Pilot Testing Ramp-up Marketing and Support Production and Sales YEAR YEAR 4 Qu 04 Q Assume all cash flows occur at the end of each perioda. 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 valueb. 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 70,000C. 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%

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution