Chapter $8$ Case

Englewood Company has an opportunity to produce and sell a revolutionary new smoke detector for homes. To determine whether this would be a profitable venture, the company has gathered the following data on probable costs and market potential:

a$.$ New equipment would have to be acquired to produce the smoke detector. The equipment would cost $$100,000$ and be uscable for $12$ ycars. After $12$ years, it would have a salvage value equal to $10\%$ of the original cost.

b$.$ Production and sales of the smoke detector would require a working eapital investment of $$40\mathrm{.}000$ to finance accounts reccivable, inventories, and day$-$to$-$day cash neods. This working capital would be released for use clsewhere after $12$ years.

c$.$ An extensive marketing study projects sales in units over the next $12$ ycars as follows:

$\backslash$table$[[$Year$,$Sales in Units$],[,4,000],[2.,7\mathrm{.}000],[,\backslash$table$[[10\mathrm{.}000]]]]$

d$.$ The smoke detcctors would sell for $$45$ cach; variable costs for production, administration, and sales would be $$25$ per unit.

c$.$ To eain cntry into the market the eompany would have to adrornse hoavily in the caty years of saics: Ihe advartising propram follows

Year Amount $of$ Ycarls

$1=2$

$3$ Adsertising

$4=$ solofon