Check my work 18 Problem 3-11 (Algo) 78 points Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the Patay2 chip, will take two years to develop. However because other chip manufacturers will be able to copy the technology, it will have a market life of two years after it is introduced. Perot expects to be able to price the chip higher in the first year, and it anticipates a significant production cost reduction after the first year as well. The relevant information for developing and selling the Patay2 is given as follows: eBook Print References PATAY2 CHIP PRODUCT ESTIMATES Development cost $ 20,eee,000 Pilot testing $5,000,000 Debug 5 3,800,000 Ramp-up cost 3,000,000 Advance marketing 6,600,000 I Marketing and support cost 1,000,000 per year Unit production cost year 1 655.ee Unit production cost year 2 545.00 AAAAA 18 $ $ Unit production cost year 1 Unit production cost year 2 Unit price year 1 Unit price year 2 Sales and production volume year 1 Sales and production volume year 2 Interest rate 655.00 545.00 820.00 650.00 250,000 150,000 10 % 1.78 points eBook PROJECT SCHEDULE PATAY2 CHIP PROJECT TIMING YEART YEAR 2 YEAR3 IST 2ND IST 2ND IST 2ND HALE HALF HALE HALE HALF HALF YEAR 4 IST 2ND HALE SEALS Print References PATAY2 CHP Development Pilot Testing Debus Ramp-up Advance Marketing Marketing and Support Production and Sales 18 b. Perot's engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years (5870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented? (Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars, Round your answer to the nearest thousand.) 178 points ellook Check my work 18 Problem 3-11 (Algo) 78 points Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the Patay2 chip, will take two years to develop. However because other chip manufacturers will be able to copy the technology, it will have a market life of two years after it is introduced. Perot expects to be able to price the chip higher in the first year, and it anticipates a significant production cost reduction after the first year as well. The relevant information for developing and selling the Patay2 is given as follows: eBook Print References PATAY2 CHIP PRODUCT ESTIMATES Development cost $ 20,eee,000 Pilot testing $5,000,000 Debug 5 3,800,000 Ramp-up cost 3,000,000 Advance marketing 6,600,000 I Marketing and support cost 1,000,000 per year Unit production cost year 1 655.ee Unit production cost year 2 545.00 AAAAA 18 $ $ Unit production cost year 1 Unit production cost year 2 Unit price year 1 Unit price year 2 Sales and production volume year 1 Sales and production volume year 2 Interest rate 655.00 545.00 820.00 650.00 250,000 150,000 10 % 1.78 points eBook PROJECT SCHEDULE PATAY2 CHIP PROJECT TIMING YEART YEAR 2 YEAR3 IST 2ND IST 2ND IST 2ND HALE HALF HALE HALE HALF HALF YEAR 4 IST 2ND HALE SEALS Print References PATAY2 CHP Development Pilot Testing Debus Ramp-up Advance Marketing Marketing and Support Production and Sales 18 b. Perot's engineers have determined that spending $10 million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $50 higher in both years (5870 for year 1 and $700 for year 2). What is the NPV of the project if this option is implemented? (Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars, Round your answer to the nearest thousand.) 178 points ellook