1. TUTORIAL 2 TESTING THE PRE- PRODUCTION STRATEGY Part 3 - Steps to test the financial feasibility of the Prototype Stage and enter the financing plan.

2. USING THE SLIDE PRESENTATION  This slide presentation is fully interactive. Although it has been pre-programmed to advance automatically, you may override these times by using your mouse.  Pressing the right mouse button will pause the program and provide you with a menu which allows you to expand the view of the slides to Full Screen and move backwards or forward through the slides.  Alternatively you may click on the scroll bar on the right of the slide to move forwards or backwards through the slides.

3. What You Will Learn  After completing Part 1 you will be able to enter the sales and variable production costs for your new product.  After completing Part 2 you will be able to enter the fixed production costs, a capital budget, the research schedule, and indirect fixed costs.  After completing Part 3 you will be able to test the financial feasibility of the Prototype Stage and enter the financing plan.

4. Steps to Test the New Product Strategy Step 1 Test the viability of your product concept Step 2. Develop and test your Pre-production strategy Step 3. Develop and test your Commercialization strategy

5. TABS IN THE NEW PRODUCT TEMPLATE Welcome - This tab links the New Product Template to the Online Course Menu - This tab provides a menu to help navigate through the New Product template as well as links to these tutorials. Concept - This worksheet will test the feasibility of your new product concept. Prototype - This worksheet will test the feasibility of your Pre- production strategy. Full Production - This worksheet will test the feasibility of your Commercialization strategy. Summary Statements - Provides a series of proforma financial statement summaries.

6. HOW TO SET UP PROTOTYPE WORKSHEET Step 1 Enter the sales and variable production costs Step 2. Enter the fixed production costs Step 3. Enter the capital budget Step 4. Enter the research and I.P. costs Step 5. Enter the indirect costs Step 6. Check the Cash Flow and enter the financing sources Step 7. Enter the details of any new loans You may work directly in the Prototype worksheet or use the menu found in the Menu tab to help enter the data.

7. CASH FLOW AND FINANCING SOURCES Follow the Numbered Orange Dots to Enter the Financing Sources In the Menu page click Cash flow and financing sources. This will take you to the Prototype worksheet. 1 Click on CASH FLOW in the Prototype Stage Navigation System 2

8. Review the Cash Flow for the Prototype Stage. Check to See That Cash Flow is Adequate to Sustain the Project Through This Stage. A Sample Cash Flow is Reproduced Below.

9. FINANCING SOURCES Follow the Numbered Orange Dots to Enter the Financing Sources. Click on FINANCING PLAN in the Prototype Stage Navigation System 2 To return to the Prototype Stage Navigation System press the keys on your computer. (Press the key while holding down the key. 1

10. Enter the amount of equity that will be issued in each year of the Prototype Stage 4 Enter the Amount of Debt and Equity That Will be Arranged in Each Year of the Prototype Stage Enter the amount of the new loans that will be arranged in each year of the Prototype Stage. 3 Enter the amount of equity that will be redeemed in each year of the Prototype Stage 5

11. Enter the Dividend Policy Enter the Earnings Distribution Rate which will be applied to the common shares. Enter the Preferred Share dividend rate for each year of the of the Prototype Stage. Initially, make the costs the same for each year. Later you can change the values. You may enter data into any of the blue shaded areas. 6

12. AMORTIZATION SCHEDULES Follow the Numbered Orange Dots to Enter the Terms of Each Loan. Click on YEAR 1 LOAN in the Prototype Stage Navigation System 2 To return to the Prototype Stage Navigation System press the keys on your computer. (Press the key while holding down the key. 1

13. Enter the term of the loan in years. 4 Enter the Terms of the Loans that are Arranged in Each of the Prototype Stage. A sample for a Year 1 Loan is Shown Below. Enter the Nominal Interest Rate,.. 3 Enter 1.0 as the number of payment periods per year.. 5

14. To learn more about the Prototype Stage review Module 3 in the New Product Development Course.

15. End The Tutorial End The Tutorial What do you want to do next? Repeat The Tutorial Repeat The Tutorial