developing a fiber optic gyro with a D-shaped optical fiber with an elliptical core. You have been contracted to help MJMPM Gyros decide if this venture is worth undertaking based on a financial ana

developing a fiber optic gyro with a D-shaped optical fiber with an elliptical core. You have been contracted to help MJMPM Gyros decide if this venture is worth undertaking based on a financial analysis using the data provided by the New Products Manager. MJMPM uses the spreadsheet form below for their financial analysis and decision making.

Provided Data:

Development Costs $300,000

Development time 9 months

Performance testing (Pilot Phase) $60,000

Production Ramp Up $100,000

Marketing and support/yr $45,000

Sales and Production volume/yr 15,000

Shaft production cost/unit $25

Unit Price $75

Interest Rate (annual) 5%

Expected Product Life Cycle 4 Years

We have just received news that our gyros have an application by the DoD. Because of this, we qualified for a government guaranteed loan at 2% interest. The bad news is that our New Products Manager just re-evaluated the cost of Ramping up to $300,000 because the EPA requires additional Hazardous Waste disposal requirements involved in our production process.

Should we still continue with our plans to develop this new gyro?

Development Costs $300,000

Development time 9 months

Shaft strength (Pilot Phase) $60,000

Production Ramp Up $300,000

Marketing and support/yr $45,000

Sales and Production volume/yr 15,000

Shaft production cost/unit $25

Unit Price $75

Interest Rate (annual) 2%

Expected Product Life Cycle 4 Years

ATTACHMENT PREVIEW

Download attachment

Year 1
Year 2
Year 3
Year 4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Development
100,000
100,000
100,000  
Pilot Test of Shaft Strength
Ramp Up Schedule
Marketing and Support
Production and Sales
Development
   
   
   
   
Pilot Testing
Production Ramp up
Marketing and Support
Production Volume
Unit Production cost
Production Costs  $25/unit
Sales Volume
Unit Price
$75/unit
Sales Revenue
 Period Cash Flow 
 Present Value @ 5% 
 Project NPV 
 $-   
Year 1
Year 2
Year 3
Year 4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Development
Pilot Test of Shaft Strength
Ramp Up Schedule
Marketing and Support
Production and Sales
Development
Pilot Testing
Production Ramp up
Marketing and Support
Production Volume
Unit Production cost
Production Costs  $25/unit
Sales Volume
Unit Price   $75/unit
Sales Revenue
 Period Cash Flow 
 Present Value @ 2% 
 Project NPV 
 $-   
Should I undertake this venture?
 Explain
.
Should CEH Gyros, Inc still undertake this venture? 
Explain
.
Question 5 10 Points
MJMPM Gyros, Inc is developing a fiber optic gyro with a D-shaped optical
fiber with an elliptical core.
You have been contracted to help MJMPM Gyros
decide if this venture is worth undertaking based on a financial analysis using
the data provided by the New Products Manager.
MJMPM uses the
spreadsheet form below for their financial analysis and decision making.
Provided Data:
Development Costs
$300,000
Development time
9 months
Performance testing (Pilot Phase)
$60,000
Production Ramp Up
$100,000
Marketing and support/yr
$45,000
Sales and Production volume/yr
15,000
Shaft production cost/unit
$25
Unit Price
$75
Interest Rate (annual)
5%
Expected Product Life Cycle
4 Years
Question 5 Answer:
Question 6 Answer:
Question 6 10 Points
We have just received news that our gyros have an
application by the DoD.
Because of this, we qualified for a government
guaranteed loan at 2% interest.
The bad news is that our New Products
Manager just re-evaluated the cost of Ramping up to $300,000 because the
EPA requires additional Hazardous Waste disposal requirements involved in
our production process.
Should we still continue with our plans to develop this new gyro?
Development Costs
$300,000
Development time
9 months
Shaft strength (Pilot Phase) $60,000
Production Ramp Up
$300,000
Marketing and support/yr $45,000
Sales and Production volume/yr
15,000
Shaft production cost/unit
$25
Unit Price
$75
Interest Rate (annual)
2%
Expected Product Life Cycle
4 Years

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