solve 8) a) and b) using info below

simple rate of return is 51.67%

question 8) to be solved below

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 $240,000 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 1 2 3 Sales in Units 13,000 18,000 20,000 22,000 c. Production and sales of the device would require working capital of $56,000 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 $35 each; variable costs for production, administration, and sales would be $20 per unit. e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $151,000 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 $128,000 $ 65,000 $ 55,000 g. The company's required rate of return is 17%. Required 5 Calculation of Net Operating Income for Matheson's Operations in Year 4 Expected Sales in Units 22000 Projected Year 4 Per Unit Sales Revenue 770000 Variable Expensws 440000 Contribution Margin 330000 Fixed Expenses: Salaries and Other (w/o Dep) (151000-37000) 114000 Depreciation 37000 Advertising 55000 Total Fixed Expenses 206000 Net operating Income 124000 Calculation of Depreciation Cost of the Asset Life 240000 6 Years 18000 Salvage value at end of 6 years Depreciation is based on: Cost Less Salvage Value Yearly Depreciation would be (220000/6 Years) 222000 37000 Required 6 Calculation of Matenson's Simple rate of return for electric device for Year 4: Formula will be Simple rate of Return (ARR)= Net Operating Income/Initial Investment 100 (124000/240000)*100 51.67% Required 7 Calculation of Company's Avarage Operating Assets for Year 4: Average Operating Assets will be Beginning of Year 1 End of Year 1 End of Year 3 End of Year 4 Working Capital at Beginning of Year 1 Total Avarage Operating Assets will be (720000/4 years) 240000 203000 129000 92000 56000 720000 180000 8. Calculate the Margin, Turnover, and ROI (Return on Investment) for Year 4 as projected using CONNECT information. Use gross average assets in your calculations (Do not subtract depreciation). Calculate each using the formulas from Chapter 10. Calculate ROI as NOI/Average operating assets. SHOW YOUR WORK!!! a. How does ROI compare to the Simple Rate of Return calculated in 6). Discuss what is similar and what is different about the ratios. (20 to 50 words). b. Does ROI also equal Margin times Turnover? It should. If it does not, go back and review your calculations