Apply the Concept

Lawson Company is considering production of an electronic tablet with the following associated data:

	Expected annual revenues, $1,543,000.
	A projected product life cycle of five years.
	Equipment, $1,647,000 with a salvage value of $189,000 after five years.
	Expected increase in working capital, $195,000 (recoverable at the end of five years).
	Annual cash operating expenses are estimated at $940,000.
	The required rate of return is 12 percent.

(See Exhibit 19B-1 & Exhibit 19B-2)

1.

Estimate the annual cash flows for the tablet project by completing the following table: Cash outflows may be entered as negative numbers.

Year	Item	Cash Flow
0	Equipment	$
	Working capital
	Total	$
1-4	Revenues	$
	Operating expenses
	Total	$
5	Revenues	$
	Operating expenses
	Salvage
	Recovery of working capital
	Total	$

2.

Using the estimated cash flows, calculate the NPV (round the discount factor to three decimal places and the present values to the nearest dollar):

NPV = $

Thus, the project would be - Select your answer -acceptedrejectedItem 13 .