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 $120,000 and have a six-year useful life. After six years, it would have a salvage value of about $18.000. b. Sales In units over the next six years are projected to be as follows: Year Sales in Units 6,000 11,000 13,000 15,000 4-6 C. Production and sales of the device would require working capital of $44,000 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 $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.) 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 $ 74,000 $53,000 $43,000 g. The company's required rate of return is 15%. Click here to view Exhibit 7B-1 and Exhibit 7B-2, 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 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? Req 1 Red 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 Incremental contribution margin Incrememental fixed expenses Net cash inflow (outflow) REGI Req 1 REGRA Reg 2A Reg 2B 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 Reg 1 Reg 2A Reg 2B Would you recommend that Matheson accept the device as a new product? Yes ONO EXHIBIT 7B-2 Present Value of an Annuity of $1 in Arrears; Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 2 1886 1859 1833 1808 1.783 1759 1736 1713 1690 1668 1647 1.626 1605 1.585 1566 1.547 1528 1509 1492 1474 1.457 1.440 2.775 2723 2.673 2624 2.577 2.531 2.487 2444 2402 2.361 2.322 2.283 2246 2.210 2174 2.140 2.106 2074 2042 2011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.1993.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.712 4.564 4.423 4.288 4160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 8 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 9 7435 7108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463 10 8.111 7722 7360 7024 6710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 8.760 8.306 7.887 7499 71396.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327 4177 4.035 3.902 3.776 3.656 12 9.385 8.863 8.384 7943 7536 71616.814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4.439 4.278 4127 3.985 3.851 3.725 9.986 9.394 8.853 8.358 7904 7487 7103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4203 4.053 3.912 3.780 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 3.962 3.824 11.118 10.380 9.712 9.108 8.559 8.061 7.606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4.489 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 4.357 4.189 4.033 3.887 12.166 11,274 10.477 9.763 9122 8.544 8.022 75497120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775 4.576 4.391 4.219 4.059 3.910 18 12.659 11.690 10.828 10.059 9.372 8.7568.201 7702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928 13.134 12.085 11.158 10.336 9.604 8.950 8.365 7839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843 4.635 4.442 4.263 4.097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7469 7025 6.623 6.259 5.929 5.628 5.353 5101 4.870 4.657 4.460 4.279 4.110 3.954 21 14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7562 7102 6.687 6.312 5.9735.665 5.384 5127 4.891 4.675 4.476 4.292 4.121 3.963 14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7645 7.170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4302 4.130 3.970 14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7.718 7.230 6.792 6.399 6.044 5723 5.432 5167 4.925 4.703 4.499 4311 4137 3.976 24 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7784 7.283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4.713 4.507 4.318 4.143 3.981 25 15.622 14.094 12.783 11.654 10.675 9.8239.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 4.514 4.323 4147 3.985 26 15.983 14.375 13.003 11.826 10.810 9.929 9161 8.488 7.896 7.372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4.520 4.328 4151 3.988 27 16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7943 7.409 6.935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.332 4154 3.990 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7984 7.441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4.157 3.992 29 16.984 15.141 13.591 12.278 11.158 10.198 9.370 8.650 8.022 7.470 6.983 6.551 6.166 5.820 5.510 5.229 4.975 4743 4.531 4.337 4.159 3.994 30 17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7.496 7003 6.566 6.177 5.829 5.517 5.235 4.979 4.746 4534 4339 4.160 3.995 40 19.793 17159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7.634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4544 4.347 4.166 3.999 17 22 EXHIBIT 7B-1 Present Value of $1; | Periods 4% 5% 6% 7% 8% 9% 10% 1% 12% 13% 4% 5% 16% 7% 18% 19% 20% 21% 22% 23% 24% 25% 10962 0952 0943 0935 0926 097 0909 0901 0893 0885 087 0870 0862 0855 0847 0840 0833 0826 0820 083 0806 0800 2 0925 0.907 0890 0873 0.857 0842 0826 0.812 0.797 0783 0.769 0756 0.743 0731 0718 0706 0694 0683 0672 0661 0650 0640 0.889 0.864 0840 086 0794 02 0751 0731 07/12 0693 0675 0658 0641 0624 0609 0593 0579 0564 0.551 0537 0524 0512 4 0855 0.823 0792 0763 0.735 0.708 0683 0659 0636 0613 0.592 0572 0.552 0.534 0516 0499 0.482 0467 0.451 0437 0423 0410 10822 0784 0747 0713 0.681 0650 0621 0593 0567 0543 0519 0497 0476 0.456 0437 0419 0402 0386 0370 0355 0341 0328 10790 0.746 0705 0666 0630 0596 0564 0535 0507 0480 0456 0432 0410 0.390 0370 0.352 0335 0319 0.303 0289 0275 0262 0760 0.711 0665 0623 0.583 0547 0513 0482 0452 0425 0400 0376 0354 0333 034 0296 0279 0263 0249 0235 0222 0210 8 0731 0.677 0627 0582 0540 0502 0467 0.434 0404 0376 0351 0327 0305 0.285 0266 0249 0233 0218 0204 0191 0179 0168 9 0703 0645 0592 0544 0500 0460 0424 0391 0361 0333 0308 0284 0263 0.243 0225 0209 0194 0180 0167 0155 0144 0134 | 10 0676 0614 0558 0508 0.463 0422 0386 0352 0.322 0295 0.270 0.247 0227 0.208 0191 0.176 0162 0149 0137 0.126 0116 0107 | 11 0650 0.585 0527 0475 0429 0388 0350 0.317 0287 0261 0.237 0215 0195 0178 0162 0148 0135 0123 012 0103 0094 0086 2 0625 0557 0497 0444 0.397 0356 0319 0286 0257 0231 0208 0187 0168 0152 03] 0124 0112 0102 0092 0083 0076 0069 3 0601 0530 0469 0415 0.368 0326 0290 0.258 0229 0204 0182 0163 0145 0130 016 0104 0.093 0084 0075 0068 0061 0055 4 0.57 0.505 0.442 0388 0340 0299 0.263 0232 0205 0181 0160 0.141 0.125 011 0099 0088 0078 0069 0062 0055 0049 0.044 5 0555 0.481 047 0362 0.35 0275 0239 0209 0183 0160 0.140 0123 0108 0.095 0084 0074 0065 0057 0051 0045 0040 0035 6 0534 0458 0394 0339 0292 0252 0218 0.188 0163 0141 0.123 0107 0093 0081 0071 0062 0054 0047 0042 0036 0032 0028 1 053 0.436 0371 037 0270 0231 0198 0170 0146 0125 0108 0093 0080 0.069 0060 0.052 0045 0039 0034 0030 0026 0023 18 0494 0.416 0350 0296 0250 0212 0180 053 0130 011 0095 0081 0069 0059 0051 0044 0038 0032 0028 0024 0021 0018 10.475 0396 0331 027 0.232 0194 0164 0.138 016 0098 0083 0070 0060 0.051 0043 0037 0031 0027 0023 0020 007 0014 20 0.456 037 0312 0258 0.215 0178 0149 0124 0104 0087 0073 0061 0.051 0043 0037 0031 0026 0022 0.019 0016 0014 0012 21 10439 0359 0294 0242 0199 0164 0135 0112 0093 0077 0064 0053 0044 0037 0031 0026 0022 0018 0015 0013 001 0009 22 0422 0.342 0278 0226 0184 0150 0123 0101 0.083 0068 0056 0046 0038 0.032 0026 0022 0018 005 0013 001 0009 0007 23 0406 0326 0262 0211 0170 0138 0112 0.091 0074 0060 0.049 0040 0033 0027 0022 0.018 0.05 0012 0010 0.009 0007 0006 24 0390 0.310 0.247 0197 0158 0126 0102 0.082 0066 0053 0043 0035 0.028 0023 0019 0.015 0013 0010 0008 0007 0006 0.005 25 0375 0.295 0233 0184 0.146 0116 0092 0074 0.059 0047 0038 0030 0.024 0020 0016 0013 0010 0009 0007 0006 0005 0004 26 0361 0281 0220 0172 0135 0106 0084 0.066 0053 0042 0033 0026 0021 007 004 001 0009 0007 0006 0005 0004 0003 27 0347 0.268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0.004 001 0009 0007 0006 0005 0004 0003 0002 28 0333 0255 0196 0150 0116 0090 0069 0.054 0.042 0033 0026 0020 0016 0012 0010 0008 0006 0005 0004 0003 0002 0002 0321 0.243 0185 0141 0107 0082 0063 0048 0037 0029 0022 007 004 0.011 0.008 0006 0005 0004 0003 0002 0002 0.002 30 0308 0.231 0174 0131 0099 0075 0057 0044 0033 0026 0020 005 0012 0.009 0007 0005 0004 0003 0003 0002 0002 0001 40 0208 0.142 0097 0067 0046 0032 0022 005 001 0008 0005 0004 0003 0.002 0001 0001 0001 0000 0000 0000 0000 0000