Build a quantitative model to analyze the development and sale of a bicycle light. Assume that you could sell 20,000 units per year for five years at a sales price (wholesale) of $20 per unit and a manufacturing cost of $10 per unit. Assume that production ramp-up expenses would be $20,000, ongoing marketing and support costs would be $2,000 per month, and development would take another 12 months. How much development spending could such a project justify?

Can anyone please explain the solution in detail, how the development cost becomes 500000$? how calculations have been made for this question. It would be great help if someone could solve the same question based on the solution provided to get a clear concept.

How much development spending could such a project justify?

If the analysis reveals a negative NPV, will you choose to pursue a product? Why? Why not?

Explain how you will optimize above pricing to maximize profits?

How would you use the quantitative and qualitative analysis method to capture the economic performance of an entire line of products to be developed and introduced over several years?

Compute the trade-off rules for the case described in Exercise 2.