Check my work Clarion Company is considering 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 $200,000 and be usable for 8 years. After 8 years, it would have a salvage value equal to 10% of the original cost. and sales of the smoke would require a working capital investment of $50,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released for use elsewhere after 8 years c An extensive marketing study projects sales in units over the next 8 years as follows Year(a) &.000 9,000 14,000 d. The smoke detectors would sell for $40 each; variabl e. To gain entry into the market, the e costs for production, administration, and sales would be $25 per unit. t Other fixed costs for salaries, insurance, maintenance, and straight-line depreciation on equipment would total $135,000 per year Depreciation is based on cost less salvage value g. The company's required rate of return is 13%. Ignore income taxes) Required: 1. Comoute the net cash inflow (cash receiots less vearlv cash ooeratina expenses) anticipated from sale of the smoke detectors for Prev 1of 2111 Next > Help Save&Exit Sub Check my wo t Other fixed costs for salaries, insurance, maintenance, and straight-line depreclation on equipment would total $135.000 per year (Depreciation is based on cost less salvage value) g. The company's required rate of return is 13%. taxes) 1. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the each year over the next 8 years. (Enter any cash outflows with a minus sign. Round your l nearest dollar amount) The net cash inflow from sales of the device for each year would be: Year 1Year 2 Year 3Year 4-8 2-a. Using the data computed in requirement (1) above and other data provided in the problem, determine the net present value of the proposed investment. (Hint Use Microsoft Excel to calculate the discount factor(s)) (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to nearest whole dollar amount.) Prev 1of2 Next> Sales in units 9,000 16,000 Other foced expenses 2-a. Using the data computed in requirement () above and other data provided in the problem, determine the net present value c proposed investment. (Hint Use Microsoft Excel to calculate the discount factorts)) (Negative amount should be indicated by a minus sign. Do not round intermediat te calculations and round your final answer to nearest whole dollar amount.) 2-b. Would you recommend that Clarion Company accept the smoke dethctor as a new product? O Yes O No Prev 10f 2EE Next >
