hi, can you please answer these. thanks for your help.
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.
hi, can you please answer these. thanks for your help. Matheson Electronics has just developed a...
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