Answered step by step
Verified Expert Solution
Question
1 Approved Answer
99m was paid the year before, for project to be installed A computer manufacturer is considering making a new type of device called an iDevice
99m was paid the year before, for project to be installed A computer manufacturer is considering making a new type of device called an iDevice (or iD). In the past year, the company spent 99m to develop the iD as payments to the inventor, Sliv Mobs. The machinery needed to make wl cost 200m and the device will be on sale for the product will be obsolete and the machinery will be sold for 35m. The machinery's costs (running costs, maintenance, depreciation) each year will be 61,25m per year four years. After that time it is believed that Budgeted revenues are estimated to be: Revenues (Em) 50 250 380 90 Year 4 If revenues exceed 100m in any year, then the inventor, Sliv Mobs, of the iD will be paid a royalty. This royalty will be 5% of annual revenues and will be paid one year after the year in which the revenues were made. The parts needed to make the iD will be bought from suppliers and will cost: Year Cost of Parts (m) 10 50 80 18 Each year that the iD is sold, workers will be paid wages of 6m per year; however to meet demand, some extra workers will be employed in year 3, costing an extra 5m Starting from the first day of the production, before any sales is made, the company will advertise the iD. Each of four year next (forthcoming) year's budgeted revenue and payable in advance. The company's cost of capital is 10%. Assume all cash flows occur at the year end. unless otherwise indicated. s, the cost of advertising will equal 15% of the please see the following page for requirements) Required: conclude whether the con should proceed in its production ii) Calculate simple payback period (ii) Discuss what other factors you think the management should consider before deciding to make the iD
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started