2. Cordless Tool Inc. is developing new battery technology over the next two years. They...
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2. Cordless Tool Inc. is developing new battery technology over the next two years. They are fearful of overseas knockoffs once the product hits the market and therefore are predicting a two-year market life. They can market the battery at a higher price in year one, and then taking VE savings (Value Engineering) in year two to reduce production costs. Here is the data for the project. CAUTION - this is formatted in HALF YEARS, not QUARTERS. Here is the project plan over the next 4 years: a) What are the yearly cash flows and their Present Value for this project with the assumptions provided in the table? 20 pts. b) Their engineering staff have determined that spending another $8 million on development will add more features - allowing them to price the battery $60 higher in both years ( $910 in year 1 and $685 for year 2 ). Is it worth the additional investment? Why or why not? 20 pts. c) If sales are only 250,000 in Year 1 and 150,000 for the second year, should Cordless Tool Inc. move forward with the project? (assume production rates match the sales rates) 20 pts
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