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Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the Patay 2 chip, will take two
Perot Corporation is developing a new CPU chip based on a new type of technology. Its new chip, the Patay chip, will take two years to develop. However, because other chip manufacturers will be able to copy the technology, It will have a market life of two years after it is introduced. Perot expects to be able to price the chip higher in the first year, and it anticipates a significant production cost reduction after the first year as well. The relevant information for developing and selling the Patay is given as follows:
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Assume all cash flows occur at the end of each period.
a What is the net present value at the discount rate of of this project? Negative value should be indicated by a minus sign. Enter your answer in thousands of dollars. Round your answer to the nearest thousand.
Net present value
b Perot's engineers have determined that spending $ million more on development will allow them to add even more advanced features. Having a more advanced chip will allow them to price the chip $ higher in both years for year and $ for year What is the NPV of the project if this option is implemented? INegative value slould be indicated by a minus sign. Enter your answer in thousands of daliars. Round your answer to the nearest thousand.
Thel present value
C If sales are only the first year and the second yeaf, wnat would the NPV of the progect be Assume the development costs brd salos price sre as ongina y estimated inegalive value should be indicated by a minus sign Enter your answer in viousands of dollars. Round your answer to ithe neareht thousand
Tiet present vave
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