Req $1$

Req $2A$

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.$)$

$\backslash$table$[[,,$Year $1,$Year $2,$Year $3,$Year $4-6],[\backslash$table$[[$Incremental contribution$],[$margin$]],$S$\_(0),120,000,195,000,$$$225,000$vv$,$$$255,000$vv$],[$Incrememental fixed expenses,$$,177,000$ox$,5177,000$x$,$$$177,000\backslash$times $,$$$177,000$ox$],[$Net cash inflow $($outflow$),$$$,(57,000)\backslash$Theta $,18,000\backslash$times $,48,000$ox$,78,000\backslash$times $]]$ 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.$)$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:

New equipment would have to be acquired to produce the device. The equipment would cost $$114,000$ and have a six$-$year useful life. After six years, it would have a salvage value of about $$6,000.$

Sales in units over the next six years are projected to be as follows:

Year Sales in Units

$18,000$

$213,000$

$315,000$

$4617,000$

Production and sales of the device would require working capital of $$51,000$ to finance accounts receivable, inventories, and day$-$to$-$day cash needs. This working capital would be released at the end of the project$$s life.

The devices would sell for $$45$ each; variable costs for production, administration, and sales would be $$30$ per unit.

Fixed costs for salaries, maintenance, property taxes, insurance, and straight$-$line depreciation on the equipment would total $$177,000$ per year. $($Depreciation is based on cost less salvage value.$)$

To gain rapid entry into the market, the company would have to advertise heavily. The advertising costs would be:

Year Amount of Yearly Advertising

$12$ $ $32,000$

$3$ $ $60,000$

$46$ $ $50,000$

The company$$s required rate of return is $6\%.$

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required: 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.$)$

$\backslash$table$[[,,$Year $1,$Year $2,$Year $3,$Year $4-6],[\backslash$table$[[$Incremental contribution$],[$margin$]],$$$,120,000,$$$195,000$vv$,$$$225,000$$$,$$$255,000$vv$],[$Incrememental fixed expenses,$$,191,000,$$$191,000$vv$,$$$219,000$vv$$,$$$209,000$vv$],[$Net cash inflow $($outflow$),,(71,000)$vv$,4\mathrm{.}000,6\mathrm{.}000$vv$$,$$$46,000?]]$

$2-$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?