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Fill the table and answer which of the above investments are the best. Matheson Electronics has just developed a new electronic device that it believes
Fill the table and answer which of the above investments are the best.
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 $180,000 and have a six-year useful life. After six years, it would have a salvage value of about $12,000. b. Sales in units over the next six years are projected to be as follows: Year 1 2 3 4-6 Sales in Units 8,500 13,500 15,500 17,500 c. Production and sales of the device would require working capital of $49,000 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 $35 each; variable costs for production, administration, and sales would be $20 per unit. e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $153,000 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: Year 1-2 3 4-6 Amount of Yearly Advertising $ 47,000 $58,000 $ 48,000 g. The company's required rate of return is 9%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Note: Use the File button on the left of the window and download the fild HW6.1Q11 Tables. Use these tables to assist in your calculations of requirements 1 and 2a. 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-a. 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 this question by entering your answers in the tabs below. Reg 1 Reg 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 $ 127,500 $ 202,500 $ 232,500 $ 262,500 Incremental contribution margin Incrememental fixed expenses Net cash inflow (outflow) $ 172,000 $ 172,000 $ 183,000 $ 173,000 $ (44,500) $ 30,500 49,500 $ 89,500 Reg 1 Req 2A > Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B 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 IS 5,328 Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Reg 2B Would you recommend that Matheson accept the device as a new product? Yes NoStep by Step Solution
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