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Matheson Electronics has just developed a new clectronic device it believes will have broad market appeal. The company has performed marketing and cost studies that

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Matheson Electronics has just developed a new clectronic device 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 $315,000 and have a six year useful life. After six years, it would have a salvage value of about $15,000. b. Sales in units over the next six years are projected to be as follows: Sales in Units 9.000 15.000 18.000 22.000 e. Production and sales of the device would require working capital of $60,000 to finance accounts receivable, inventories, and day.today cash needs. This working capital would be relcased at the end of the project's life. d. The devices would sell for $35 cach:variable costs for production, administration, and sales would be $15 per unit. Page 393 e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $135,000 per year. (Depreciation is based on cost less salvage value.) To gain rapid entry into the market, the company would have to advertise heavily. The advertising costs would be Amount of Yearly Advertising S180,000 S150,000 $120,000 8. The company's required rate of return is 14%. Antent of Yearly Advertising SISO,000 $150.000 $120.000 8. The company's required rate of return is 14% Required: 1. Compute the net cash inflow (incremental contribution cach year over the next six years. inus incremental fixed expenses) anticipated from sale or the device for

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