Compute the trade-off rules for the case

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Reference no: EM132315725

Textbook - Product Design and Development, Fifth Edition, Author - Karl T. Ulrich by Steven D. Eppinger. ISBN 978-0-07-340477-6.

Chapter 17 - Product Development Economics

Exercises -

1. List five reasons firms may choose to pursue a product even if the quantitative analysis reveals a negative NPV.

2. 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?

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

4. Revise the tornado chart in Exhibit 17-13 to show the effect of an increase in development time. Assume that the minimum change in development time is zero, and the maximum change in development time is an increase of one quarter.

Thought Questions -

1. Can you think of successful products that never would have been developed if their creators had relied exclusively on a quantitative financial model to justify their efforts? Do these products share any characteristics?

2. One model of the impact of a delay in product introduction is that sales are simply shifted later in time. Another model is that some of the sales are pushed beyond the "window of opportunity" and are lost forever. Can you suggest other models for the implications of an extension of product development time? Is such an extension ever beneficial?

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

Reference no: EM132315725

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