please do: b.
b. DO THIS ONLY IF YOU ANSWERED YES on connect. If you answered no, skip this. If your answer to 2-b on CONNECT was "yes", complete this requirement. It means your NPV was positive and Matheson should accept the device as a new product. Let's assume the company is concerned about its advertising budget and would like to decrease its advertising by 20% in years 11 and 2. A marketing study indicates that decreasing the advertising cost by 20% in the years 1 and 2 only, will decrease sales in the first second and third year by 15%. (Remember that changing the projected sales will also change the COGS) Projected sales in years 4 through 6 as well as the cost assumptions would remain unchanged. What would the new Net Present Value be with these adjustments to advertising expense and sales? Should Matheson Electronics accept the device now? Show your work by include the Cash Flows for the appropriate years and the discount factors used in the table below. Use these table for (a) or (b) (10 points): Now YI Y2 Y3 Y4 YS Y6 Cost of equipment Working capital Yearly net cash flow Release of working capital Salvage value of equipment Total cash flows (@) Discount Factor (b) Present Value (6)x(b) Net Present Value 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 $168,000 and have a six-year useful life. After six years, it would have a salvage value of about $12,000. b. Sales in units over the next six years are projected to be as follows: Year 1 2 3 4-6 Sales in Units 8,000 13,000 15,000 17,000 c. Production and sales of the device would require working capital of $48,000 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 $30 each; variable costs for production, administration, and sales would be $15 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 $ 46,000 $57,000 $ 47,000 g. The company's required rate of return is 7%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Note: Use the File button on the left of the window and download the fild HW6.1011 Tables. Use these tables to assist in your calculations of requirements 1 and 2a. 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? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 2B Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated 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 $ 120,000 $ 195,000 $ 225,000 $ 255,000 Incremental contribution margin Incrememental fixed expenses Net cash inflow (outflow) $ 152.000 $ 163,000 $ 153,000 $152,000 $ (32,000) $ 43,000 62,000 $ 102,000 Req 2A > Explanation Show correct answers g. The company's required rate of return is 7%. ed Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Note: Use the File button on the left of the window and download the fild HW6.1011 Tables. Use these tables to assist in your calculations of requirements 1 and 2a. 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? Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Using the data computed in (1) above and other data provided in the problem, determine the net present value proposed investment. (Negative amounts should be indicated by a minus sign. Round your final answer to the dollar amount.) Net present value $ 100,655 Explanation Show correct answers g. The company's required rate of return is 7%. ded Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Note: Use the File button on the left of the window and download the fild HW6.1Q11 Tables. Use these tables to assist in your calculations of requirements 1 and 2a. 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Reg 2B Would you recommend that Matheson accept the device as a new product? Yes ONO
