You are the New Product Manager for a medical device company. Your new product i

Question

You are the New Product Manager for a medical device company. Your new product is in the middle of testing and development and the product is expected to be launched in January 2019. If it is launched in January 2019, your finance expert recently told you that the “NPV of the project is greater than $0” and that the product will be “profitable to the firm over the 10 year life cycle of the product”.   Today, you found out that your product needs to go through even more testing and development due to increased government regulation and that your product may not launch until January 2020. Without consulting your finance expert, how do you think this affects the assessment of going ahead and funding the development of the product. Explain.

Explanation / Answer

There will be more cost due to all the more testing and development which is caused by expanded government regulation. Not just that consulting company will generate the revenue from Jan 2020 which cause 1 year delay in revenue recognition.

Both of these factors will influence the NPV of the task additional cost and postpone revenue generation will diminish the NPV, therefore if NPV esteem is little at that point there may be the likelihood that undertaking will not ready to generate positive NPV in new conditions. In the event that the NPV is huge and cost is likewise extensive and more than NPV on the other hand it will be generate negative NPV and he ought not ready to dispatch the task. Be that as it may, NPV is expansive sum and cost is verly less then one can state that this venture will in any case procure positive NPV and one ought to proceed with the task.

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