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 $220,000 and be usable for 8 years. After 8 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 capital investment of $52,000 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(s) Sales in Units 7,000 10,000 14,000 16,000 3 4-8 d. The smoke detectors would sell for $50 each; variable costs for production, administration, and sales would be $35 per unit. e. To gain entry into the market, the company would have to advertise heavily in the early years of sales. The advertising program follows: Year(s) 1-2 3 4-8 Amount of Advertising $81,000 61,000 51,000 f. Other fixed costs for salaries, insurance, maintenance, and straight-line depreciation on equipment would total $150,800 per year. (Depreciation is based on cost less salvage value.) g. The company's required rate of return is 7%. (Ignore income taxes.) Required: 1. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the smoke detectors for each year over the next 8 years. (Enter any cash outflows with a minus sign. Round your intermediate and final answers to the nearest dollar amount.) The net cash inflow from sales of the device for each year would be: Year 1 7,000 Year 2 10,000 Year 3 14,000 Year 4-8 16,000 0 0 0 0 Sales in units Sales in dollars Less variable expenses Contribution margin Less fixed expenses: Advertising Other fixed expenses Total fixed expenses Net cash inflow (outflow) 0 0 0 0 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.) Net present value 2-b. Would you recommend that Clarion Company accept the smoke detector as a new product? O Yes O No