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:
Year | Sales in Units |
1 | 8,500 |
2 | 13,500 |
3 | 15,500 |
4–6 | 17,500 |
Year | Amount of Yearly Advertising |
||
1–2 | $ | 47,000 | |
3 | $ | 58,000 | |
4–6 | $ | 48,000 | |
Solution:
Depreciation = ($18000- 12000) / 6 =$28,000
Computation of net cash inflow from sale of device | ||||
Particulars | Year 1 | Year 2 | Year 3 | Year 4-6 |
Sales in units | 8500 | 13500 | 15500 | 17500 |
Sales in dollar | $2,97,500.00 | $4,72,500.00 | $5,42,500.00 | $6,12,500.00 |
Variable expenses | $1,70,000.00 | $2,70,000.00 | $3,10,000.00 | $3,50,000.00 |
Contribution margin | $1,27,500.00 | $2,02,500.00 | $2,32,500.00 | $2,62,500.00 |
Fixed Expenses: | ||||
Salaries and other (Excluding depreciation) | $1,25,000.00 | $1,25,000.00 | $1,25,000.00 | $1,25,000.00 |
Advertising | $47,000.00 | $47,000.00 | $58,000.00 | $48,000.00 |
Total fixed expenses | $1,72,000.00 | $1,72,000.00 | $1,83,000.00 | $1,73,000.00 |
Net cash inflow (Outflow) | -$44,500.00 | $30,500.00 | $49,500.00 | $89,500.00 |
Computation of Net Present Value - Matheson Electronics | |||||||
Particulars | Now | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 |
Cost of equipment | -$1,80,000 | ||||||
Working capital | -$49,000 | ||||||
Yearly net cash flows | -$44,500 | $30,500 | $49,500 | $89,500 | $89,500 | $89,500 | |
Release of working capital | $49,000 | ||||||
Salavage value of equipment | $12,000 | ||||||
Total cash flows | -$2,29,000 | -$44,500 | $30,500 | $49,500 | $89,500 | $89,500 | $1,50,500 |
PV Factor | 1.000 | 0.917 | 0.842 | 0.772 | 0.708 | 0.650 | 0.596 |
Present Value | -$2,29,000 | -$40,807 | $25,681 | $38,214 | $63,366 | $58,175 | $89,698 |
Net present value | $5,328 |
Yes, Matheson should accept.
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 $138,000 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 it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information: 1. New equipment would have to be acquired to produce the device. The equipment would cost $315,000 and have a six-year useful life. After six years, it would have a salvage value of about $15,000. 2. Sales in units over the next six years are projected to be as follows: Year...
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 $216,000 and have a six-year useful life. After six years, it would have a salvage value of about $12,000. 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 information: New equipment would have to be acquired to produce the device. The equipment would cost $216,000 and have a six-year useful life. After six years, it would have a salvage value of about $12,000. 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 information: 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. 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 information: 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 $12,000. 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 information: New equipment would have to be acquired to produce the device. The equipment would cost $474,000 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 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 $294,000 and have a six-year useful life. After six years, it would have a salvage value of about $6,000 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 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 $120,000 and have a six-year useful life. After six years, it would have a salvage value of about $18,000. 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
information:
New equipment would have to be acquired to produce the device.
The equipment would cost $480,000 and have a six-year useful life.
After six years, it would have a salvage value of about
$12,000.
Sales in units over the next six years are projected to be as
follows:
Year
Sales...