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behavior on the part of the vice presiue 2 Net Present Value Analysis of a New Product [LO 8-2 Matheson Electronics has just developed a eson Electronics has just developed a new electronic device that it believes will have b market appeal. The company has performed marketing and cost studies that revealed the following 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 Sales in units over the next s information a. b. ix years are projected to be as follows: Year Sales in Units 9,000 15,000 18,000 22,000 2 4-6 c. Production and sales of the device would require working capital of $60,000 to finance accounts receivable, inventories, and day-to-day cash needs. This voring capital would be d. The devices would sell for $35 each; variable costs for production, administration, and sales e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation released at the end of the project's life. would be $15 per unit. on the equipment would total $135,000 per year. (Depreciation is based on cost less salvage value.) Capital Budgeting Decisions f. To gain rapid entry into the market, the company would have to advertise heavily. The adver- mar tising program would be: Amount of Yearly Advertising $180,000 $150,000 $120,000 Yea: 1-2 4-6 g. The company's required rate of return is 14%. Required: 1. Compute the cas e net cash inflow (cash receipts less yearly cash operating expenses) anticipated uc n (1) above and other data provided in the problem, determine the e of the proposed investment. Would you recommend that Matheson accept 2. e of the device for each year over the next six years. Using the data compute the device as a new product? Appendix 8A: The Concept of Presen rd a year from now for the I have more LEARNING OBJE Understand prese