calculate the net present value for the dog leaf m leash project

O. The Alpha Dog Company manufactures and distributed avariety of pet related products In response to Customer feedback relating to the fragle nature of many commercially available dog leashes, the company's product development team has recently introduced a prototype of a new, virtually indestructibledog leash. The development of the prototype cost $250,000 in research and development costs. The product development team has presented their proposal to Adam Smith the company's president and CEO Adam has asked you, as the chief financial officer, to prepare an analysis of the proposal and to provide a decision regarding whether or not to pursue to proposal Your first step in the andysis was to commission a market survey to assess the potential demand for the new product. You hired a consulting firm, Williams and Connelly, at aflat rate of $100,000 to conduct this market research. The results of their study indicate that potential consumers would be willingto pay upwards of S75 per dog leash, on the presumption that it truly is indestructible. It is further estimated that Alpha will have this segment of the market vietudly all to itself for 5 years, at which time it is believed the market will have become saturated and that sales of the new leash will cease The market study indicates that unit sales volume for this period will as follows Year 1 2 3 4 5 Unit Sales 10,000 15,000 25,000 20,000 5.000 After assessing the market demand potential, yourturnto the head of your manufacturing department, John Wils, to consider the operating costs of producing the new dog leath. Johnbelieves that it will benecessary to purchase some new manufacturing equipment for the new product After calling several potential suppliers, John think that the best deal on the necessary equipment will cost Alpha $1.5 million, Fortax purposes, this equipment will belied onder the years MACRS assification John estimated that the vanale con of production, such aw materials and labor, wil cost about $35 per unit and that the the cost of production wio run another $500,000 per yew Finally John thinks that reasonable time of the real value of the production equipment will be about $300,000 years from now Default Style English (USA) o L. Next, you consult with Alpha's marketing department to evaluate any potential impact on existing leash models. Janet Mellon, the head of the market department, thinks that the introduction of this new and improved product will take some sales away from its current top-of-the-linedog leash. If Alpha does not go ahead with the new product introduction, it is believed that its existing dog leash will sell for S45 per leash and that unit sales volume will be 3,000 units per year for the next 5 years. The production costs of the existing model have been established as $15 per unit in variable costs and fixed production costs of $200,000 per year. If Alpha were to go ahead with the new leash project, is has been estimated that unit sales of its existing product will decline to 5,000 units per year for the next 5 years. Additionally, Janet thinks that, in order to reach this sales volume, it will be necessary to reduce the selling price of the existing leash by $5 per unit. Finally, based on Alpha spast experience with new product introductions you estimate that, at inception of the project, Alpha will need to invest $400,000 in inventory to support the anticipated sales volume of this amount, $200,000 will be financed by taking on additional short-term liabilitiese buyinginventory on credit). It is assumed that this working capital investment wilbe fully recovered the end of the project's 5-year horizon Alpha pays income taxes at a marginalrice of 40% and assigns a required return of 1086 to new product proposals Default Style English (USA) N O. The Alpha Dog Company manufactures and distributed avariety of pet related products In response to Customer feedback relating to the fragle nature of many commercially available dog leashes, the company's product development team has recently introduced a prototype of a new, virtually indestructibledog leash. The development of the prototype cost $250,000 in research and development costs. The product development team has presented their proposal to Adam Smith the company's president and CEO Adam has asked you, as the chief financial officer, to prepare an analysis of the proposal and to provide a decision regarding whether or not to pursue to proposal Your first step in the andysis was to commission a market survey to assess the potential demand for the new product. You hired a consulting firm, Williams and Connelly, at aflat rate of $100,000 to conduct this market research. The results of their study indicate that potential consumers would be willingto pay upwards of S75 per dog leash, on the presumption that it truly is indestructible. It is further estimated that Alpha will have this segment of the market vietudly all to itself for 5 years, at which time it is believed the market will have become saturated and that sales of the new leash will cease The market study indicates that unit sales volume for this period will as follows Year 1 2 3 4 5 Unit Sales 10,000 15,000 25,000 20,000 5.000 After assessing the market demand potential, yourturnto the head of your manufacturing department, John Wils, to consider the operating costs of producing the new dog leath. Johnbelieves that it will benecessary to purchase some new manufacturing equipment for the new product After calling several potential suppliers, John think that the best deal on the necessary equipment will cost Alpha $1.5 million, Fortax purposes, this equipment will belied onder the years MACRS assification John estimated that the vanale con of production, such aw materials and labor, wil cost about $35 per unit and that the the cost of production wio run another $500,000 per yew Finally John thinks that reasonable time of the real value of the production equipment will be about $300,000 years from now Default Style English (USA) o L. Next, you consult with Alpha's marketing department to evaluate any potential impact on existing leash models. Janet Mellon, the head of the market department, thinks that the introduction of this new and improved product will take some sales away from its current top-of-the-linedog leash. If Alpha does not go ahead with the new product introduction, it is believed that its existing dog leash will sell for S45 per leash and that unit sales volume will be 3,000 units per year for the next 5 years. The production costs of the existing model have been established as $15 per unit in variable costs and fixed production costs of $200,000 per year. If Alpha were to go ahead with the new leash project, is has been estimated that unit sales of its existing product will decline to 5,000 units per year for the next 5 years. Additionally, Janet thinks that, in order to reach this sales volume, it will be necessary to reduce the selling price of the existing leash by $5 per unit. Finally, based on Alpha spast experience with new product introductions you estimate that, at inception of the project, Alpha will need to invest $400,000 in inventory to support the anticipated sales volume of this amount, $200,000 will be financed by taking on additional short-term liabilitiese buyinginventory on credit). It is assumed that this working capital investment wilbe fully recovered the end of the project's 5-year horizon Alpha pays income taxes at a marginalrice of 40% and assigns a required return of 1086 to new product proposals Default Style English (USA) N