Matheson Electronics has just developed a new electronic device that it belleves will have broad market appeai. 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 $120,000 and have a six-year useful life. Alter six years, it would have a salvage value of about $18,000. b. Sales in units over the next stx years are projected to be as follows. c. Production and sales of the device would require working capital of $44,000 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 $45 each; variable costs for production, administration, and sales would be $25 per unit. e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $132.000 per year. (Depreciation is based on cost less salvage value) 1. To gain rapid entry into the market, the company would have to advertase heavly. The advertising costs would be: g. The company's required rate of retum is 15%. Click here to view Exhibit 12B-1 and Exhibit 1282, to determine the appropriate 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 nexd six years. 2. 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? 9. The company's required rate of return is 15%. Click here to view Exhibit 1284 and Exhibit 1282 , to determine the appropriate discount factor(s) using tabies. Required: 1 Compute the net casls inflow (incremental contribution margin minus incrementai fixed expenses) anticipated from sale of the devi for each year over the next six years. 2- 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. 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 signi) $132,000 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 return is 15% : Click here to view Exhiblu 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables: Required: for each year over the next six years. 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 belaw. Uing the data computed in (1) above and other data provided in the problem, determine the net prosent value of thes dollar amount) e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $132,000 per year. (Depreclation is based on cost less salvage value) f. To gain rapid entry into the market, the company would have to advertise heavly. The advertising costs would be: 9. The company's required rate of retum is 15% Click here to view Exhibit 128-1 and Exhibit 128-2. to determine the appropriate discount factor(5) using tables: Required: 1. Compute the net cash inflow (incremental contribution margin minus incremental foced expenses) anticipated from sale of the device for each year over the next six years. 2a. 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. Would you recommend that Matheson accept the device as a new product
