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: PATAY2 CHIP PRODUCT ESTIMATES Development cost $ 20,880, eee Pilot testing $ 5,800, eee Debug $ 3,eee, eee Ramp-up cost $ 3,880, eee Advance marketing $ 5,800, eee Marketing and support cost $ 1,88e, eee per year Unit production cost year 1 $ 655.00 Unit production cost year 2 $ 545.00 Unit price year 1 $ 820.00 Unit price year 2 $ 650.00 Sales and production volume year 1 250,000 Sales and production volume year 2 150, see Interest rate 10 % PROJECT SCHEDULE PATAY2 CHP PROJECT TIMING YEAR YEAR 2 YEAR 3 IST 2ND IST 2ND IST 2ND HALT HALE HALF HALI HALF HALF YEAR 4 2ND HALF HALF IST PATAY2 Cup Development Pilot Testing Debug Ramp-up Advance Marketing Marketing and Support Production and Sales Assume all cash flows occur at the end of each period. Assume all cash flows occur at the end of each period. a. What is the net present value (at the discount rate of 10%) of this project? (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value 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 ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is Implemented? (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated. (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value 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: PATAY2 CHIP PRODUCT ESTIMATES Development cost $ 20,880, eee Pilot testing $ 5,800, eee Debug $ 3,eee, eee Ramp-up cost $ 3,880, eee Advance marketing $ 5,800, eee Marketing and support cost $ 1,88e, eee per year Unit production cost year 1 $ 655.00 Unit production cost year 2 $ 545.00 Unit price year 1 $ 820.00 Unit price year 2 $ 650.00 Sales and production volume year 1 250,000 Sales and production volume year 2 150, see Interest rate 10 % PROJECT SCHEDULE PATAY2 CHP PROJECT TIMING YEAR YEAR 2 YEAR 3 IST 2ND IST 2ND IST 2ND HALT HALE HALF HALI HALF HALF YEAR 4 2ND HALF HALF IST PATAY2 Cup Development Pilot Testing Debug Ramp-up Advance Marketing Marketing and Support Production and Sales Assume all cash flows occur at the end of each period. Assume all cash flows occur at the end of each period. a. What is the net present value (at the discount rate of 10%) of this project? (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value 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 ($870 for year 1 and $700 for year 2). What is the NPV of the project if this option is Implemented? (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value c. If sales are only 200,000 the first year and 100,000 the second year, what would the NPV of the project be? Assume the development costs and sales price are as originally estimated. (Enter your answer in thousands of dollars. Round your answer to the nearest thousand.) Net present value