Reference no: EM132944526

Bio-cervo is a non-profit organization specializing in biomedical and neurological research. The company conducts great research and its mission is to advance science for the benefit of mankind by selling its products at the cost of their development. Bio-cervo must acquire a new laboratory that will allow it to develop a new technology to assist movement for people with paralysis.

• According to statistics nearly 50,000 people are affected by paralysis in Canada, the amount of robotic limbs that can be developed and sold will depend on development and production costs.
• Construction of the new laboratory will require an investment of $ 40 million, of which $ 4,000,000 will be used to purchase the land, $ 12,000,000 to construct the building and $ 24,000,000 to purchase the equipment. The project is expected to last 15 years, the first 5 years will be spent on research and development, after which the robotic movement assistance limbs will then be offered for sale at cost of production for 10 years. At the end of the 15 years, the equipment will have a disposition value of $ 4,000,000, the land $ 8,000,000 and the building $ 7,000,000.
• Annual research and development costs are estimated at $ 1,000,000 dollars per year (during the first 5 years). Annual equipment and building maintenance costs are $ 125,000 (for 15 years), production (material) costs are $ 15,000 per unit. The company will be able to benefit from tax credits relating to scientific research and experimental development, ie 55% of expenditure incurred in research and development, and 35% of expenditure relating to equipment intended for production.

The body's TRAM is 18%. You should ignore all tax implications except tax credits.

Considering that Bio-cervo expects to sell an average of 4,000 units per year, answer the following questions

Problem a) Build the cash flow table for this project.

Problem b) What is the PE of the project?

Problem c) What is the ACS of the project?

Problem d) What should the average selling price be for a robotic movement assistance member?