Polaris ideas A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Lid.. could costs in one of its plants in Japan. Relevant data relating to the equipment follow Purchase cost of the equipment $682,000 Annual cost savings that will be provided by the equipment $110,000 Life of the equipment 10 years Required: 1a. Compute the payback period for the equipment. 1b. If the company requires a payback period of four years or less, would the equipment be purchased? 2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment's useful life. 2b. Would the equipment be purchased if the company's required rate of return is 14%? Salaseval 2100 Matheson Electronies has and cost st o ries has just developed a new electronic device that believes will have broad market appeal. The company has performed marketing dies that revealed the following information: would b would have a salvage value of about $12,000. u t 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 alca in units over the next six years are projected to be as follows: Year sales in Units 8.000 13,000 15,000 4-6 17,000 action 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. 4. The devices would sell for $30 each: variable costs for production, administration, and sales would be sis per unit. c. 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 advertise heavily. The advertising costs would be: Year 1- 3 4-6 Amount of Yearly Advertising $ 46,000 $57,000 $47,000 8. The company's required rate of return is 7%. 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