Question

Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The company h

a. New equipment would have to be acquired to produce the device. The equipment would cost $300,000 and have a six-year usefu

Req 1 Reg 2A Req 2B Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipate

Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Using the data computed in (1) above a

Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req TB Would you recommend that Matheson acce

hi, can you please answer these. thanks for your help.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Solution 1:

Annual depreciation = (Cost - Salvage value) / Useful life = ($300,000 - $24,000) / 6 = $46,000

Computation of net cash inflow from sale of device
Particulars Year 1 Year 2 Year 3 Year 4-6
Sales in units 10000 15000 17000 19000
Sales in dollar $300,000.00 $450,000.00 $510,000.00 $570,000.00
Variable expenses $100,000.00 $150,000.00 $170,000.00 $190,000.00
Contribution margin $200,000.00 $300,000.00 $340,000.00 $380,000.00
Fixed Expenses:
Salaries and other (Excluding depreciation) $128,000.00 $128,000.00 $128,000.00 $128,000.00
Advertising $150,000.00 $150,000.00 $50,000.00 $40,000.00
Total fixed expenses $278,000.00 $278,000.00 $178,000.00 $168,000.00
Net cash inflow (Outflow) -$78,000.00 $22,000.00 $162,000.00 $212,000.00

solution 2a:

Computation of Net Present Value - Matheson Electronics
Particulars Now Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Cost of equipment -$300,000
Working capital -$61,000
Yearly net cash flows -$78,000 $22,000 $162,000 $212,000 $212,000 $212,000
Release of working capital $61,000
Salvage value of equipment $24,000
Total cash flows -$361,000 -$78,000 $22,000 $162,000 $212,000 $212,000 $297,000
PV Factor 1.000 0.885 0.783 0.693 0.613 0.543 0.480
Present Value -$361,000 -$69,030 $17,226 $112,266 $129,956 $115,116 $142,560
Net present value $87,094

Solution 2b:

As NPV is positive, therefore matheson should accept the device as a new product.

Add a comment
Know the answer?
Add Answer to:
hi, can you please answer these. thanks for your help. Matheson Electronics has just developed a...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $120,000 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:...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $318,000 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:...

  • Case 13-32 Net Present Value Analysis of a New Product [LO13-2] Matheson Electronics has just developed a new electroni...

    Case 13-32 Net Present Value Analysis of a New Product [LO13-2] Matheson Electronics has just developed a new electronic device that 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 $246,000 and have a six-year useful life. After six years, it would have a salvagee value of about $24,000. b. Sales in units over...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $228,000 and have a six-year useful life. After six years, it would have a salvage value of about $24,000. b. Sales in units over the next six years are projected to be as follows:...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $444,000 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...

  • 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 inform...

    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 $228,000 and have a six-year useful life. After six years, it would have a salvage value of about $24,000 b. Sales in units over the next six years are projected to be as follows...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $228,000 and have a six-year useful life. After six years, it would have a salvage value of about $24,000. b. Sales in units over the next six years are projected to be as follows:...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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 $258,000 and have a six-year useful life. After six years, it would have a salvage value of about $24,000. Sales in units over the next six years are projected to be as follows: Year Sales...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market...

    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:...

  • Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The com...

    Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The company has performed marketing and cost studied that revealwd the following information: a. New equipment would have to be acquired to produce the device. The equipment would cost $264,000 and have a six-year useful life. After six years, it would have a salvage value of about $24.000. b. Sales in units over the next six years are projected to be as follows:...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT