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    Tuff Wheels Was Getting Ready To Start Its Development Project

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    Amit Pandey
    Tuff Wheels is preparing to develop a new product called the Kiddy Dozer, a miniature bulldozer toy for children. The development is estimated to cost $1 million over 9 months with additional costs of $200,000 for pilot testing and $400,000 for ramp-up. Annual marketing costs will be $150,000 and sales are forecast at 60,000 units per year at $100 production cost and $170 price per unit over a 3 year product life.

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    Tuff Wheels Was Getting Ready To Start Its Development Project

    Uploaded by

    Amit Pandey
    382 views1 page
    Tuff Wheels is preparing to develop a new product called the Kiddy Dozer, a miniature bulldozer toy for children. The development is estimated to cost $1 million over 9 months with additional costs of $200,000 for pilot testing and $400,000 for ramp-up. Annual marketing costs will be $150,000 and sales are forecast at 60,000 units per year at $100 production cost and $170 price per unit over a 3 year product life.

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    Tuff Wheels Was Getting Ready to Start Its Development Project

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    Tuff Wheels is preparing to develop a new product called the Kiddy Dozer, a miniature bulldozer toy for children. The development is estimated to cost $1 million over 9 months with additional costs of $200,000 for pilot testing and $400,000 for ramp-up. Annual marketing costs will be $150,000 and sales are forecast at 60,000 units per year at $100 production cost and $170 price per unit over a 3 year product life.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    382 views1 page

    Tuff Wheels Was Getting Ready To Start Its Development Project

    Uploaded by

    Amit Pandey
    Tuff Wheels is preparing to develop a new product called the Kiddy Dozer, a miniature bulldozer toy for children. The development is estimated to cost $1 million over 9 months with additional costs of $200,000 for pilot testing and $400,000 for ramp-up. Annual marketing costs will be $150,000 and sales are forecast at 60,000 units per year at $100 production cost and $170 price per unit over a 3 year product life.

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    Solved: Tuff Wheels was getting ready to start its

    development project

    Tuff Wheels was getting ready to start its development project for a new product to be added to
    its small motorized vehicle line for children. The new product is called the Kiddy Dozer. It will
    look like a miniature bulldozer, complete with caterpillar tracks and a blade. Tuff Wheels has
    forecasted the demand and the cost to develop and pro-duce the new Kiddy Dozer. The table
    below contains the relevant information for this project.
    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 Price................ $ 170 Interest Rate 8%

    Tuff Wheels also has provided the project plan shown below. As can be seen in the project
    plan, the company thinks that the product life will be three years until a new product must be
    created.

    a. What are the yearly cash lows and their present value (discounted at 8 percent) of this
    project? What is the net present value?
    b. What is the impact on NPV for the Kiddy Dozer if the actual unit sales are 50,000 per year or
    70,000 per year?
    c. What is the effect caused by changing the discount rate to 9, 10, or 11percent?

    ANSWER
    https://solvedquest.com/tuff-wheels-was-getting-ready-to-start-its-development-project/

    Reach out to [email protected] for enquiry.


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