Question: Development cost and timing: $8 million over 2 years Time period 5 years Ramp-up cost: $4 million over 1 year, starting 1st quarter of year

Development cost and timing: $8 million over 2 years

Time period 5 years

Ramp-up cost: $4 million over 1 year, starting 1st quarter of year 2.

Marketing and support cost: $1.6 million/year, starting 3rd quarter of year 2.

Unit production cost: $550/unit.

Sales and Production volume: 20,000 units/year, starting 3rd quarter of year 2

Discount rate: 3 percent per quarter

Unit Price: $1200/unit

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

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