• Develop the project schedule for a planning horizon of 5 years (divide years into quarters)
• You may used spreadsheet (excel) to work out this example.

• Development cost and timing: $8 million over 2 years
• Ramp-up cost: $4 million over 1 year, starting 1^st quarter of year 2.
• Marketing and support cost: $1.6 million/year, starting 3^rd quarter of year 2.
• Unit production cost: $550/unit.
• Sales and Production volume: 20,000 units/year, starting 3^rd quarter of year 2
• Discount rate: 3 percent per quarter
• Unit Price: $1200/unit

Using excel

1. Calculate the NPV for the total period.
2. Calculate the PV for the 1^st quarter of the 4^th year
3. Calculate the PV for the 2^nd quarter of 2^nd year
4. What decision (Go or No-Go) will you make for this product based on the NPV?
5. If your development cost were to go up by 25% what is your resulting NPV?