Secure Homes is pondering an opportunity to produce and sell a new smart home monitoring system that
Question:
Secure Homes is pondering an opportunity to produce and sell a new smart home monitoring system that can be managed remotely using a smartphone app. The company has gathered the following data on probable costs and market potential: New equipment would have to be acquired to produce the monitoring system. The equipment would cost $327,000 and be usable for 10 years. After 10 years, it would have a salvage value equal to 10% of the original cost. Production and sales of the monitoring system would require a working capital investment of $126,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released for use elsewhere by the company after 10 years. An extensive marketing study projects sales in units over the next 10 years as follows:
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb