Answer:
Tuff Wheels
The net present value of the project is:
= $13,617,154
Explanation:
a) Data and Calculations:
Development cost $ 1,250,000 
Estimated development time 9 months 
Pilot testing $ 200,000 
Ramp-up cost $ 400,000 
Total Project cost in Year 0 = $1,850,000 ($ 1,250,000 + $200,000 + $400,000)
Marketing and support cost $ 150,000 per year 
Sales and production volume 60,000 per year 
Unit production cost $ 100 
Unit price $ 205 
Contribution per unit = $105 ($205 - $100)
Total contribution margin = $6,300,000 ($105 * 60,000)
Marketing and support cost  $ 150,000
Interest rate 8%                         148,000
Net income (cash flow)      $6,002,000
Discount rate = 8%
Annual net cash inflow = $6,002,000
Annuity factor = 2.577
Total cash inflow = $15,467,154 ($6,002,000 * 2.577)
Total project cost      1,850,000
Net present value  $13,617,154