Muhammad Reza Kusuma Alfaiz

29117450

Answers for Question no. 10 (chapter 3 page 66)

a.Base-Case Scenario (Analysis is in 000s)

Project Schedule Year1 Year2 Year3 Year4
Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development -533 -533 -533
Pilot Testing -100 -100
Ramp up -200 -200
Marketing & Support -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38
Production Volume 15 15 15 15 15 15 15 15 15 15 15 15
Unit Production Cost -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
- - - - - - - - - - - -
Production Cost 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500
Sales Volume 15 15 15 15 15 15 15 15 15 15 15 15
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600 3600

Period Cash Flow -533 -533 -871 -338 2062 2062 2062 2062 2062 2062 2062 2062 2062 2062 2062 2062
PV Year 1(r=8) -522 -512 -820 -306 1831 1796 1759 1726 1691 1658 1625 1594 1563 1532 1501 1472
Project NPV 17587
b. If sales are only 50,000 the NPV decrease to $14,905,000. If Tuff Wheels has actual unit sales 70,000 per year then NPV will increase to
$21,609,000 with the higher sales rate.
Sales Revised to
50.000
Project Schedule Year1 Year2 Year3 Year4
Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development -533 -533 -533
Pilot Testing -100 -100
Ramp up -200 -200
Marketing & Support -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38
Production Volume 13 13 13 13 13 13 13 13 13 13 13 13
Unit Production Cost -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
- - - - - - - - - - - -
Production Cost 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300 1300
Sales Volume 13 13 13 13 13 13 13 13 13 13 13 13
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 3120 3120 3120 3120 3120 3120 3120 3120 3120 3120 3120 3120

Period Cash Flow -533 -533 -871 -338 1782 1782 1782 1782 1782 1782 1782 1782 1782 1782 1782 1782
PV Year 1(r=8) -522 -512 -820 -306 1582 1552 1520 1492 1461 1433 1404 1377 1351 1324 1297 1272
Project NPV 14905
 Sales Revised to 70000
Project Schedule Year1 Year2 Year3 Year4
Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development -533 -533 -533
Pilot Testing -100 -100
Ramp up -200 -200
Marketing & Support -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38
Production Volume 18 18 18 18 18 18 18 18 18 18 18 18
Unit Production Cost -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
- - - - - - - - - - - -
Production Cost 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800
Sales Volume 18 18 18 18 18 18 18 18 18 18 18 18
Unit Price 240 240 240 240 240 240 240 240 240 240 240 240
Sales Revenue 4320 4320 4320 4320 4320 4320 4320 4320 4320 4320 4320 4320

Period Cash Flow -533 -533 -871 -338 2482 2482 2482 2482 2482 2482 2482 2482 2482 2482 2482 2482
PV Year 1(r=8) -522 -512 -820 -306 2204 2162 2117 2077 2035 1996 1956 1919 1881 1844 1807 1772
Project NPV 21609

c. If change to higher discount rate, it will reduce the project NPV of Kiddy Dozer.