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Lecture 10C - NPV - Solution
Lecture 10C - NPV - Solution
example
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development cost $ 40,000 $ 40,000 $ 40,000
Tooling investment $ 100,000 $ 100,000
Testing cost $ 25,000 $ 25,000 $ 25,000 $ 25,000
Ramp up cost $ 50,000
Marketing and support cost $ 270,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
Manufacturing cost $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
Manufacturing volume 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Cost per part $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6 $ 6
Revenue $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000 $ 600,000
Sales Volume 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Price $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12 $ 12
Quarter 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Total $ (40,000) $ (40,000) $ (140,000) $ (100,000) $ (25,000) $ (25,000) $ (25,000) $ (345,000) $ 280,000 $ 280,000 $ 280,000 $ 280,000 $ 280,000 $ 280,000 $ 280,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000
PV @ 10% $ (40,000) $ (39,024) $ (133,254) $ (92,860) $ (22,649) $ (22,096) $ (21,557) $ (290,237) $ 229,809 $ 224,204 $ 218,736 $ 213,401 $ 208,196 $ 203,118 $ 198,164 $ 207,140 $ 202,087 $ 197,159 $ 192,350 $ 187,658 $ 183,081 $ 178,616 $ 174,259 $ 170,009 $ 165,863 $ 161,817 $ 157,870 $ 154,020
10% 2.50%
NPV $ 3,165,878
Built in Function $ 3,165,878