10. 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 $1.000.000 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 $170 Unit Price Interest Rate 8% Year 2 Year 3 Tuff Wheels also has provided the project plan shown as follows. As can be seen in the project plan, the company thinks that Page 65 the product life will be three years until a new product must be created. Project Schedule Year 1 Year 4 Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Development Pilot Testing Ramp-up Marketing and Support Production and Sales 4. What are the yearly cash flows and their present value (discounted at 8 percent) of this project? What is the net present value? GO