Question 1

A firm estimates that it will receive cash flows from a new product of $150,000 in Year 1, $220,000 in Year 2, and $150,000 in Year 3. If a discount rate of 7% is assumed, what is the NPV of this product's cash flows?

Accepted Answer

The NPV is calculated by discounting each cash flow to its present value and summing them up: NPV = $150,000/(1+0.07)^1 + $220,000/(1+0.07)^2 + $150,000/(1+0.07)^3 = $140,187.85 + $192,150.94 + $122,449.21 = $454,788.

Question 2

QFD, in a product development context, refers to?

Accepted Answer

QFD stands for Quality Function Deployment, which is a tool used in product development to translate customer wants and needs into specific technical requirements for a product or service.

Question 3

Which question is not associated with the product when conducting product screening?

Accepted Answer

The answer of Which question is not associated with the...

Question 4

Which ordering of the first three stages of the product development process is correct?

Accepted Answer

The correct order of the product development process is to first generate ideas, then develop a concept, and lastly analyze and screen. This is because generating ideas allows for free-flowing creativity, while developing a concept allows for refining and testing ideas. Analyzing and screening comes last in order to ensure that the final product meets the necessary criteria and is financially feasible. Therefore, the correct ordering is choice C.

Question 5

Product screening issue categories include all of the following except?

Accepted Answer

The Customer, Product, and Competition are all categories of product screening issues. Financials are not a category of product screening issues.

Question 6

Reaching out to universities, suppliers, customers, and others in a move toward research collaboration is referred to as?

Accepted Answer

Open innovation refers to the practice of reaching out to external parties, including universities, suppliers, customers, and others, in order to collaborate on research projects and develop new innovations. This approach contrasts with closed innovation, where all research and development is conducted internally within a firm.

Question 7

Which question is not associated with the financials when conducting product screening?

Accepted Answer

The question "Are the preliminary product design specifications established?" is not directly related to financials, but rather to the product development process. The other questions (A, B, and D) are all financial considerations when screening a product.

Question 8

Which question is not associated with the competition when conducting product screening?

Accepted Answer

The break-even point is a financial question and not directly related to competition in product screening. The other options are all important questions related to competition.

Question 9

The practice of copying what others do best is referred to, in a product design context, as?

Accepted Answer

Benchmarking refers to the practice of studying and analyzing the best practices, processes, and products of other companies for the purpose of improving one's own. It involves analyzing the strengths and weaknesses of successful products and using that information to create better products.

Question 10

The "roof" of the house of quality indicates what?

Accepted Answer

The "roof" of the house of quality is used to show the correlations between different technical characteristics of a product, indicating how changes in one characteristic might affect others.

Question 11

The relationships between customer requirements, product attributes, and design specification can be captured by what tool?

Accepted Answer

The tool that captures the relationships between customer requirements, product attributes, and design specification is the House of Quality, which is a key component of Quality Function Deployment (QFD). The House of Quality is a matrix that visually links customer requirements to specific engineering characteristics, and assesses how well the product design meets those requirements.

Question 12

A firm estimates that it will receive cash flows from a new product of $25,000 in Year 1, $22,000 in Year 2, and $19,000 in Year 3. If a discount rate of 8% is assumed, what is the NPV of this product's cash flows?

Accepted Answer

To calculate the NPV, we need to discount each cash flow back to the present using the discount rate of 8%. 
NPV = -$What is the best choice(s) only with the explanation?25,000/(1+0.08)^1 + $22,000/(1+0.08)^2 + $19,000/(1+0.08)^3 
NPV = -$25,000/1.08 + $22,000/1.08^2 + $19,000/1.08^3 
NPV = -$23,148.15 + $18,751.20 + $14,735.97 
NPV = $10,338.02 
Therefore, the NPV of this product's cash flows is $10,338.02, which is closest to choice B, $57,092.

Question 13

A firm estimates that it will receive cash flows from a new product of $1,000 in Year 1, $800 in Year 2, and $700 in Year 3. If a discount rate of 9% is assumed, into what range below will the NPV be?

Accepted Answer

The NPV is calculated by discounting each cash flow to its present value and summing them up. Using a 9% discount rate, the NPV is approximately $2,200, which falls in the range of less than $2500.

Question 14

The alignment of product designs with the capabilities of design engineers and the wishes of the customer is achieved through which technique?

Accepted Answer

QFD, or Quality Function Deployment, is a structured approach that helps align customer needs and wants with the capabilities and resources of the design team or company. It is a method for translating customer requirements into appropriate technical requirements and specifications for each stage of product development. QDF and QBD are not recognized techniques for alignment of product designs in this context, and QDB is not a known technique at all.

Question 15

What set of scientific techniques and insights is sometimes used by firms to attempt to better understand the subconscious minds of consumers?

Accepted Answer

Neuroscience is a set of scientific techniques and insights that is sometimes used by firms to attempt to better understand the subconscious minds of consumers. Neural networks are a type of artificial intelligence, and mind-melding and telepathy are not currently scientifically feasible.

Question 16

A firm estimates that the net present value of future cash flows from a new product will be $125,000. The firm estimates that they will spend $135,000 on product development and research. Based on these figures, what should the firm do?

Accepted Answer

Based on the information given, the estimated net present value of future cash flows is less than the estimated cost of product development and research. Therefore, the firm should not develop the product.

Question 17

Which ordering of the last three stages of the product development process is correct?

Accepted Answer

The correct order for the last three stages of the product development process is to first design and develop the product and the manufacturing processes (Design product and processes), then test the product for quality and reliability (Test product), and finally introduce the product to the market (Introduce product to market). Therefore, the correct ordering is Design product and processes F1S1S1W1F1F1F10, Test product F1S1S1W1F1F1F10, and Introduce product to market. Choice D is the only option that has this correct ordering.

Question 18

A typical financial measurement of the value of a new product idea is?

Accepted Answer

Net present value (NPV) is a common financial measurement used to calculate the economic value of a new product idea. NPV measures the present value of the cash inflows generated by a project, minus the initial investment required. It is a widely accepted method for evaluating the potential profitability of a new product idea.

Question 19

The first stage of the product development process is?

Accepted Answer

The first stage of the product development process is idea generation, where potential ideas for a new product are brainstormed and identified.

Question 20

Which Excel function is used to calculate net present value?

Accepted Answer

The NPV (Net Present Value) function is used to calculate the present value of future cash flows, taking into account a specified discount rate. NPER is used to calculate the number of periods needed to reach a specified value. PMT is used to calculate the regular payment amount for a loan or investment. PRICEDISC is used to calculate the price of a security sold at a discount to its face value.

Quiz 3: Product Design and Development