The Tuff wheels was getting ready to start their development project for a new product to be added to their email motorized vehicle line for children. The new product called the Kiddy Dozer. It will look like a manufacture bulldozer, complete with caterpillar tracks and a blade. Tuff Wheels has forecasted the demand and the cost to develop and produce the new Kiddy Dozer. Development cost $1,000,000; Estimated Development Time; 9 months; Pilot Testing; $200,000, Ramp-up cost: $400,000, Marketing and support cost; $150,000 per year, Sales and production volume; $60,000 per year, Unit production cost; $100, Unit cost $170, Interest rate; 8%.

1. What are the yearly cash flow and their present value (discounted at 8%) of this project? What is the net present value?
2. What is the impact on NPV for the Kiddy Dover if the actual sales are $50,000 per year or $70,000 per year?
3. What is the effect caused by changing the discount rate to 9%, 10% or 11% ?

Please explain if possible...thank you!