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1 Matheson Electronics has just developed a new electronic device that it believes will have brond market appeal. The company has performed marketing and cost
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Matheson Electronics has just developed a new electronic device that it believes will have brond market appeal. The company has performed marketing and cost studies that revealed the following information: a. New equlpment would have to be acquired to produce the device. The equipment would cost $480,000 and have a six-year useful life. After six years, it would have a salvoge value of about $12,000. b. Sales in units over the next six years are projected to be as follows: c. Production and sales of the device would require working capital of $61.000 to finance accounts receivable. inventories, and day to-day cash needs. This working copital would be released at the end of the project's lfe. d. The devices would sell for $60 each: variable costs for production, administration, and sales would be $45 per unit. e. Fixed costs for saiaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $155.000 per year. (Depreciation is bosed on cost less salvage value) f. To gain ropid entry into the market, the company would have to advertise heavily. The advertising costs would be: g. The company's required rate of return is 15x. Cick here to view Exhibit 14B-1 and Extibit 148-2, to determine the appropriate discount factoris) using tables. Required: KXCHIBIT 148-1 F.71311! 1472 Preveat Vulue of an Annuity of $1 ie Arrens rtf(+r)nd 9. The company's required rate of return is 15%. Click here to view Exhibit 14B-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years. 2-a. Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment 2-b. Would you recommend that Matheson accept the device as a new product? Complete this question by entering your answers in the tabs below. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from saie of the device for each year over the next six years. (Negative amounts should be indicated by a minus sign.) 9. The company's required rate of return is 15%. Cilck here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discoupt factor(s) using tables. Required: 1. Compute the net cash inflow (incremental contribution margin minus incremiental fixed expenses) anticipated from sale of the device for each year over the next six years. 2-a. Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment. 2-b. Would you recommend that Matheson accept the device as a new product? Complete this question by entering your answers in the tabs below. Using the data computed in (1) above and other dato provided in the problem, determine the net present value of the proposed investment. (Negative armounts should be indicated by a minus sign. Alound your final arwwer to the neareit whole dollar amount.) 9. The compary's required rate of return is 15%. Click here to view Exhibit 148-1 and Exhibit.148-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years. 2-a. Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment. 2-b. Would you recommend that Matheson accept the device as a new product? Complete this question by entering your answers in the tabs below. Would you recommend that Matheson accept the device as a new product Step by Step Solution
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