The Tuff Wheels was getting ready to start their development project fro a new product to be added to their small motorized vehicle line for...

The Tuff Wheels was getting ready to start their development project for a new product to be added to their small motorized vehicle line for children. The new product is called 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 development and produce the new Kiddy Dozer. The table below contains the relevant information for this project.Development Cost $1,000,000Estimated Development Time 9 monthsPilot Testing $200,000Ramp-up Cost $400,000Marketing and Support Cost $150,000 per yearSales and Production Volume 60,000 per yearUnit Production Cost $100Unit Price $170Interest Rate 8%Tuff Wheels also provided the project plan shown below. As can be seen in the project plan, the company thinks that the product life will be three years until a new product must be created.Project Schedule Year 1 Year 2 Year 3 Year 4Kiddy Dozer QI Q2 Q3 Q4 QI Q2 Q3 Q4 QI Q2 Q3 Q4 QI Q2 Q3 Q4 DevelopmentPilot TestingRamp-upMarketing and SupportProduction and Salesa. What are the yearly cash flows and their present value (discounted at 8%) of this project? What is the net present value?b. What is the impact on NPV for the Kiddy Dozer if the actual sales are 50,000 per year or 70,000 per year?c. What is the effect caused by changing the discount rate to 9%, 10%, or 11%?Answer Project Schedule Year 1 Year 2 Year 3 Year 4 Kiddy Dozer Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Year 1 Year 2 Year 3 Year 4 ($ value in thousands) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 15 15 15 15 15 15 15 15 15 15 15 15 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 -1,500 15 15 15 15 15 15 15 15 15 15 15 15 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 Period Cash Flow -333 -333 -633 -338 1,042 1,042 1,042 1,042 1,042 1,042 1,042 1,042 1,042 1,042 1,042 1,042