Final answer:
The impact on NPV for Kiddy Dozer with actual sales of 50,000 or 70,000 per year is determined by discounting future sales at a 15% interest rate to present values and then summing these up. Perform separate present value calculations for each time period and sales scenario in Excel.
Step-by-step explanation:
The impact on Net Present Value (NPV) for the Kiddy Dozer when the actual sales are 50,000 or 70,000 per year involves present value calculations under a given interest rate of 15%. To determine the NPV, future sales need to be discounted to their present value equivalents. Each sales figure would be separately inserted into the NPV formula in Excel to estimate the present value of future sales, followed by summing up these values. The calculation for each scenario might look different because of the combination of the sales figures and the time period of the cash flows. The calculation would require separate present value (PV) calculations for amounts received at different times. The outcome would help in deciding whether the investment in Kiddy Dozer warrants the expected return given the cost of capital.
For instance, to calculate the NPV with an annual sale of 50,000, you would forecast the sales revenue over the project's life, discount each year's revenue back to present value terms using the 15% interest rate, and sum those present values. A change in sales will have a direct impact on the NPV, meaning the NPV will vary significantly between the two scenarios of 50,000 and 70,000 sales per year.