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$800,000.00

Task 2—Break-even analysis. This task involves calculating the point at which the company breaks even on its product development and production investment. This means taking the cash flows estimated for the NPV analysis and figuring the year in which net income exceeds initial costs. Rate of return can also be calculated using the same data.

Task 3—Identify life cycle cost. This task identifies the life cycle cost of the product (first cut) based on projections of initial product development costs, production costs, distribution costs, marketing costs, and service and maintenance costs. This assessment helps to frame the product in the long-term financial picture of the company.

Task 4—Sensitivity analysis. This task identifies those factors or variables in the product development process that will drive costs and revenues, and financial performance in general. The goal is to see how project outcome is affected by various product or project factors, e.g., price of materials, testing validation, customer requirements, and to identify the most important factors. The outcome allows the project team to focus on those factors in design and development that are most important in delivering a successful product.

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