Building Your Skills Case [LO12-2] Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information: a. New equipment would have to be acquired to produce the device. The equipment would cost $264,000 and have a six-year useful life. After six years, it would have a salvage value of about $24,000. b. Sales in units over the next six years are projected to be as follows: Year 1 2 3 4-6 Sales in Units 13,000 18,000 20,000 22,000 c. Production and sales of the device would require working capital of $59,000 to finance accounts receivable, inventories, and day- to-day cash needs. This working capital would be released at the end of the project's life. d. The devices would sell for $50 each; variable costs for production, administration, and sales would be $35 per unit. e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $169,000 per year. (Depreciation is based on cost less salvage value.) f. To gain rapid 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 16%. Click here to view Exhibit 128-1 and Exhibit 12B-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. 2-8. 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 Req 1 Req 2A Req 2B 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. (Negative amounts should be indicated by a minus sign.) Year 1 Year 2 Year 3 Year 4-6 Incremental contribution margin Incrememental fixed expenses Net cash inflow (outflow) Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 28 Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0962 0952 0943 0935 0926 0.917 0909 0901 0893 0.885 0877 0870 0862 0.855 0847 0840 0833 0826 0820 0813 0806 0800 2 0.925 0.907 0.890 0873 0857 0842 0826 0812 0797 0783 0769 0.756 0743 0731 0718 0706 0694 0683 0672 0.661 0650 0.640 3 0.889 0864 0840 0816 0794 0.772 0751 0731 0712 0693 0675 0658 0641 0624 0609 0593 0.579 0.564 0551 0.537 0524 0512 4 0855 0823 0792 0.763 0735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0516 0499 0482 0.467 0451 0437 0423 0410 5 0822 0784 0747 0713 0681 0650 0621 0593 0.567 0543 0519 0497 0.476 0456 0437 0419 0402 0386 0.370 0.355 0.341 0328 6 0790 0746 0705 0666 0630 0596 0.564 0.535 0.507 0.480 0.456 0432 0410 0390 0370 0352 0335 0319 0303 0289 0275 0.262 7 8 0.760 0.711 0665 0623 0583 0547 0513 0482 0452 0425 0400 0376 0354 0333 0314 0296 0279 0263 0.249 0235 0222 0.210 0731 0677 0627 0582 0540 0502 0467 0434 0404 0376 0351 0327 0305 0285 0266 0.249 0233 0218 0204 0191 0179 0168 9 10 0703 0645 0592 0544 0500 0460 0424 0391 0361 0333 0308 0284 0263 0243 0225 0209 0194 0180 0167 0155 0144 0134 0676 0614 0558 0.508 0463 0422 0386 0.352 0322 0295 0270 0247 0227 0208 0191 0176 0162 0149 0137 0126 0116 0107 11 12 0650 0585 0527 0475 0429 0.388 0350 0.317 0.287 0.261 0237 0215 0195 0178 0162 0.625 0.557 0497 0444 0397 0356 0319 0286 0257 0231 0208 0187 0168 0152 0137 0148 0135 0123 0112 0103 0094 0086 0124 0112 0102 0.092 0083 0.076 0069 13 0601 0530 0469 0415 0368 0326 0290 0258 0229 0204 0182 0163 0145 0130 0116 14 0104 0093 0.084 0075 0068 0.061 0055 0577 0505 0442 0388 0340 0299 0263 0232 0205 0181 0160 011 0125 0111 0099 0088 0078 0069 0062 0055 0.049 0044 15 0555 0481 0417 0362 0315 0275 0239 0209 0183 0160 0140 0123 0108 0095 0084 0074 0065 0057 0051 0045 0040 0035 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 0062 0.054 0047 0042 0036 0032 0028 0.052 0045 0.039 0.034 0030 0026 0023. 0044 0038 0032 0028 0024 0021 0018 0037 0031 0.027 0023 0020 0017 0014 0031 0026 0022 0019 0016 0014 0.012) 0026 0022 0018 0015 0013 001 0009 0022 0018 0015 0013 0011 0.009 0.002 0534 0458 0.394 0339 0292 0252 0.218 0188 0163 0141 0123 0107 0093 0081 0.071 0513 0436 0371 0317 0270 0231 0198 0170 0146 0125 0108 0093 0080 0069 0060 0494 0416 0350 0296 0250 0212 0180 0153 0130 0111 0095 0081 0069 0059 0051 0475 0396 0331 0277 0232 0194 0164 0138 0116 0098 0083 0070 0060 0.051 0.043 0456 0377 0312 0258 0215 0178 0149 0124 0104 0087 0073 0061 0051 0043 0037 0439 0359 0294 0242 0199 0164 0135 0112 0422 0342 0278 0226 0184 0150 0123 0101 0406 0326 0262 0211 0170 0138 0112 0091 0074 0060 0049 0040 0033 0027 0022 0.018 0.015 0.012 0.010 0.009 0.007 0.006 0390 0310 0247 0197 0158 0126 0102 0082 0066 0053 0043 0035 0028 0023 0019 0015 0013 000 0008 0.007 0.006 0.005 0375 0.295 0233 0184 0146 0116 0092 0074 0059 0047 0038 0030 0024 0020 0016 0093 0077 0064 0053 0044 0037 0031 0083 0068 0056 0046 0038 0032 0026 0013 0010 0009 0007 0006 0.005 0.004 0361 0281 0.220 0172 0135 0106 0084 0066 0053 0042 0033 0026 0.021 0.017 0014 0.01 0.009 0.007 0.006 0.005 0.004 0.003 0347 0268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 001 0009 0007 0.006 0.005 0.004 0.003 0.002 0.333 0.255 0196 0150 0116 0090 0069 0054 0042 0033 0026 0020 00% 0012 0.010 0.008 0.006 0.005 0004 0.003 0.002 0.002 0321 0243 0185 0141 0107 0082 0063 0048 0037 0029 0022 0017 0014 001 0008 0.006 0.005 0004 0003 0.002 0.002 0.002 0308 0231 0174 0131 0.099 0.075 0057 0044 0033 0026 0020 0015 0012 0009 0007 0005 0004 0003 0003 0.002 0.002 0.001 0208 0142 0097 0067 0046 0032 0022 0015 0011 0.008 0.005 0004 0003 0002 0001 0.001 0.001 0000 0000 0000 0000 0000 Periods 4% 5% 6% 7% 6.247 6710 25% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 0893 0885 0877 0870 0862 0.855 0847 0.840 0833 0826 0.820 0.813 0806 0800 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1492 1474 1457 1440 2531 2487 2444 2.402 2361 2322 2283 2246 2.210 2174 2140 2106 2074 2042 2011 1981 1952 3.240 3.170 3102 3037 2.974 2.914 2855 2798 2743 2690 2.639 2589 2540 2494 2448 2.404 2362 3.890 3.791 3696 3605 3517 3433 3352 3274 3199 3127 3058 2991 2926 2.864 2803 2.745 2689 4.486 4.355 4231 4111 3998 3.889 3784 3685 3589 3.498 3410 3326 3245 3167 3092 3020 2951 5.033 4868 4712 4564 4423 4288 4160 4039 3.922 3812 3706 3605 3.508 3416 3327 3242 3161 5.535 5.335 5146 4968 4799 4639 4487 4344 4207 4078 3954 3837 3726 3619 3518 3421 3329 5.995 5759 5.537 5.328 5132 4946 4772 4607 4451 4.303 4163 4031 3.905 3786 3673 3566 3463 6418 6145 5889 5650 5426 5216 5.019 4833 4659 4494 4339 4192 4054 3923 3799 3.682 3.571 7139 6 805 6.495 6 207 5938 5687 5453 5.234 5029 4836 4656 4486 4327 4177 4035 3.902 3776 3656 7536 7161 6.814 6.492 6194 5918 5660 5421 5197 4988 4793 4611 4439 4278 4127 3985 3851 3725 7904 7487 7103 6750 6424 6122 5842 5583 5342 5118 4910 4715 4533 4362 4203 4053 3912 3780 8.244 7786 7367 6.982 6628 6302 6002 5724 5468 5229 5008 4802 4611 4432 4265 4108 3962 3824 8559 8.061 7606 7191 6811 6.462 6142 5847 5575 5324 5092 4.876 4675 4489 4315 4153 4001 3859 9.447 8851 8313 7824 7379 6974 6604 6265 5954 5668 5405 5162 4938 4730 4536 4357 4189 4033 3887 8544 8022 7549 7120 6729 6373 6047 5749 5475 5222 4990 4775 4576 4391 4219 4059 3910 8756 8201 7702 7250 6.840 6467 6128 5818 5534 5.273 5.033 4812 4608 4419 4243 4080 3.928 8950 8365 7839 7.366 6938 6550 6198 5877 5584 5.316 5070 4843 4635 4442 4263 4097 3942 9129 8.514 7963 7469 7025 6623 6259 5929 5628 5353 5101 4870 4657 4460 4279 4110 3954 9292 8649 8075 7562 7102 6.687 6312 5973 5665 5.384 5127 4891 4675 4476 4292 4121 3.963 9442 8772 8176 7645 7170 6.743 6.359 6011 5696 5410 5149 4909 4.690 4488 4.302 4130 3.970 9580 8883 8 266 7718 7230 6792 6.399 6044 5723 5432 5167 4.925 4.703 4499 4.311 4137 3.976 9707 8985 8.348 7784 7283 6835 6434 6073 5746 5451 5182 4937 4713 4507 4318 4143 3981 9823 9077 8422 7843 7330 6873 6.464 6097 5766 5467 5.195 4948 4721 4514 4.323 4347 3985 2 1886 1859 1833 1808 8% 9% 10% 11% 12% 1 0962 0.952 0943 0935 0.926 0917 0909 0901 1759 1736 1713 3 2775 2723 2673 2.624 1783 2.577 4 3630 3.546 3.465 3.387 3.312 5 4452 4329 4.212 4100 3.993 6 5.242 5.076 4.917 4767 7 6002 5786 5582 5389 4623 5206 8 9 10 8.111 11 8760 8306 7887 12 6733 6463 6.210 5971 7435 7108 6.802 6515 7722 7360 7024 7499 9.385 8863 8.384 7943 5747 13 9.986 9394 8.853 8.358 14 10.563 9899 9.295 15 11118 10.380 9712 8.745 9108 16 11652 10 838 10106 17 12.166 11274 10477 18 19 20 21 22 23 14 857 13489 12 303 11272 24 15247 13799 12.550 25 26 15.622 14.094 12 783 15.983 14 375 13 003 11 469 11654 11.826 10.371 10.529 10675 27 28 29 30 40 9763 9122 12 659 11690 10 828 10 059 9.372 13134 12.085 11158 10.336 9604 13590 12.462 11470 10594 9818 14.029 12 821 11764 10.836 10.017 14 451 13.163 12.042 11061 10201 10 810 9.929 9161 8488 7896 7372 6906 6491 6118 5783 5480 5.206 4956 4728 4520 4.328 4.151 3988 16.330 14 643 13.211 11.987 10.935 10027 9237 8548 7943 7409 6935 6.514 6136 5798 5.492 5.215 4964 4734 4524 4.332 4154 3990 16.663 14.898 13.406 12.137 11051 10.116 9.307 8.602 7984 7441 6961 6534 6152 5810 5502 5223 4970 4739 4528 4335 4157 3.992 16.984 15141 13.591 12.278 11158 10198 9370 8650 8022 7470 6983 6551 6166 5.820 5510 5229 4975 4743 4531 4.337 4159 3.994 17292 15.372 13765 12 409 11.258 10.274 9427 8694 8055 7496 7003 6566 6177 5.829 5517 5235 4979 4746 4534 4.339 4160 3.995 19.793 17159 15.046 13.332 11.925 10.757 9779 8951 8244 7634 7105 6642 6233 5871 5548 5258 4997 4760 4544 4347 4166 3.999