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

The equipment needed to make the device would cost $$150,000$ and have a six$-$year useful life with a salvage value of $$18,000.$

Sales in units over the next six years are projected to be as follows:

YearSales in Units$17,000212,000314,0004616,000$

Production and sales of the device would require working capital of $$47,000$ to be released at the end of the project$$s life.

The device would sell for $$60$ each with a variable cost of $$45$ per unit.

Fixed costs for salaries, maintenance, property taxes, insurance, and straight$-$line depreciation on the equipment would total $$151,000$ per year. $($Depreciation is based on cost less salvage value.$)$

To gain rapid entry into the market, the company would invest heavily in advertising as follows:

YearAmount of Yearly Advertising$12$$ $45,0003$$ $56,00046$$ $46,000$

The company$$s required rate of return is $6\%.$

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

Required:

$1.$ Compute the device$$s 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?

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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.

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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.

Net present value

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Should Matheson invest in the new device?