Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal.
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Question:
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 $ and have a sixyear useful life. After six years, it would have a salvage value of about $
b Sales in units over the next six years are projected to be as follows:
tableYearSales in Units
c Production and sales of the device would require working capital of $ to finance accounts receivable, inventories, and daytoday cash needs. This working capital would be released at the end of the project's life.
d The devices would sell for $ each; variable costs for production, administration, and sales would be $ per unit.
e Fixed costs for salaries, maintenance, property taxes, insurance, and straightline depreciation on the equipment would total $ 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:
tableYeartableAmount of YearlyAdvertising$
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