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need help !!! Case 14-32 (Algo) Net Present Value Analysis of a New Product [LO14-2] Matheson Electronics developed a new electronic device it believes will
need help !!!
Case 14-32 (Algo) Net Present Value Analysis of a New Product [LO14-2] Matheson Electronics developed a new electronic device it believes will have broad market appeal. The company gathered the following estimates: a. The equipment needed to make the device would cost $300,000 and have a six-year useful life with a salvage value of $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 $61,000 to be released at the end of the project's life. d. The device would sell for $30 each with a variable cost of $10 per unit. e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $174,000 per year. (Depreciation is based on cost less salvage value.) f. To gain rapid entry into the market, the company would invest heavily in advertising as follows: g. The company's required rate of return is 13%. g. The company's required rate of return is 13%. Click here to view and to determine the appropriate discount factor(s) using tables. Required: 1. Compute the device's estimated net cash inflow (incremental contribution margin minus incremental fixed expenses) for each yea over the next six years. 2-a. Calculate the net present value of the proposed investment. 2-b. Should Matheson invest in the new device? Complete this question by entering your answers in the tabs below. Compute the device's estimated net cash inflow (incremental contribution margin minus incremental fixed expenses) for each year over the next six years. Note: Negative amounts should be indicated by a minus sign. Present Value of $1;(1+r)n1 Present Value of an Annuity of $1 in Arrears; r1[1(1+r)n1] Complete this question by entering your answers in the tabs below. Compute the device's estimated net cash inflow (incremental contribution margin minus incremental fixed expenses) for each year over the next six years. Note: Negative amounts should be indicated by a minus sign. Complete this question by entering your answers in the tabs below. Calculate the net present value of the proposed investment. Note: Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Complete this question by entering your answers in the tabs below. Should Matheson invest in the new deviceStep by Step Solution
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