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:

1. 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.
2. Sales in units over the next six years are projected to be as follows:
3. Production and sales of the device would require working capital of $45,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released at the end of the project's life.
4. The devices would sell for $50 each; variable costs for production, administration, and sales would be $30 per unit.
5. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $171,000 per year. (Depreciation is based on cost less salvage value.)
6. To gain rapid entry into the market, the company would have to advertise heavily. The advertising costs would be:

:1 Grades tor Allen Hyatt: MaAs'l x a unit B Homework ( ) C H httpsz'newconnect.mheduoation.oomlflowloonnecthtml x u Course Hero )1 G how to screens-hot on ma: - G: x + Unit 8 Homework 0 15 points eBook TI References Help 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 $294,000 and have a six-year useful life. After six yearsl it would have a salvage value of about $6.000. Sales in units over the next six years are projected to be as follows: Yell: 31:18: in Unit! 1 ammo 2 11,000 3 13,000 46 15,000 ' c. Production and sales of the device would require working capital of $45,000 to nance accounts receivable, inventories, and day- to-day cash needs. This working capital would be released at the end of the project's life. d. The devices would sell for $50 each: variable costs for production, administration. and sales would be $30 per unit. e. Fined costs for salaries. maintenance. property taxes, insurance, and straight-line depreciation on the equipment would total $171,000 peryear. (Depreciation is based on cost less salvage value.) f. To gain rapid entry into the market, the company would have to advertise heavily. The advertising costs would be: Amount 05 Yearly You: Minn-timing 12 .374, 000 3 $54, 000 46 $44, 000 ' g. The company's required rate of return is 8%. Click here to view Exhibit 1334 and Exhibit 138-2 to determine the appropriate discount factor(s) using tables. Mc Graw