Matheson Electronics developed a new electronic device it believes will have broad market appeal. The company gathered the following estimates:

1. The equipment needed to make the device would cost $318,000 and have a six-year useful life with a salvage value of $18,000.
2. Sales in units over the next six years are projected to be as follows:

Year	Sales in Units
1	8,000
2	13,000
3	15,000
46	17,000

1. Production and sales of the device would require working capital of $62,000 to be released at the end of the projects life.
2. The device would sell for $35 each with a variable cost of $15 per unit.
3. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $169,000 per year. (Depreciation is based on cost less salvage value.)
4. To gain rapid entry into the market, the company would invest heavily in advertising as follows:

Year	Amount of Yearly Advertising
12	$ 120,000
3	$ 51,000
46	$ 41,000

1. The companys required rate of return is 8%.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Compute the devices estimated net cash inflow (incremental contribution margin minus incremental fixed expenses) for each year over the next six years.

2-a. Calculate the net present value of the proposed investment.

2-b. Should Matheson invest in the new device?

EXHIBIT 14B-1 Present Value of $1;(1+r)n1 Present Value of an Annuity of $1 in Arrears; r1[1(1+r)n1] Compute the device's estimated net cash inflow (incremental contribution margin minus incremental fixed expenses) for each year over the next six years. Note: Negative amounts should be indicated by a minus sign. Calculate the net present value of the proposed investment. Note: Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar amount. Complete this question by entering your answers in the tabs below. Should Matheson invest in the new device