Matheson Electionics has just developed a new electronic device thot it believes wil have brood market appeak: The company has performed morketing and cost studies that revealed the following information. a. New equipment would have to be acquired to produce the device. The equipment would cost 5198,000 and hiave a sixyear ts 4 ful Ife. After six years; i would have a salvage volue of about $24,000. b Sales in tinits over the next shryears are brolected to be as follows. c. Production snd soles of the device would requite working capitol of $52,000 to finance accounts recelvable, inventories, and dayto-day cosh needs. This working copital would be released at the end of the project's life. a The devices would cell for $50 each variable costs for production, odministration, and tales wrotild be 535 pet unit e Fixed costs for salarles, mainsenance, properfy taxes, insturance, and straight-line depreciation on the equipment would total $140,000 per year, (Oepreciation is bosed on cost less salvage value) f. To gain rapid entry into the market, the company would have to actvertise heaviy. The advertising conts would be 97 The company's required rate of return is 12%. Required: 1 Compote the net cahninfiow (incremental contibution margin minus incremental fixed expenses) anticipated from sale of the cievice for esch year over the nent six yeart 2a Uang the dats computed in (0 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 guestion by enteing your answers in the tabs below. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The company has berformed 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 $198,000 and have a six-year useful ife. 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: c. Production and sales of the device would require working capital of $52,000 to finance accounts receivable, inventories, and dayto-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 depreclation on the equipment would total $140,000 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: 9. The company's required rate of retum is 12%. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the oppropriate 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-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 os a new product? Complete this question by entering your answers in the tabs below. 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:)
