Case 14.32 (Algo) Net Present Value Analysis of a New Product [LO14-2] George Matheson is...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Case 14.32 (Algo) Net Present Value Analysis of a New Product [LO14-2] George Matheson is the general manger of Nancy Pelosi Electronics who has just developed o new electronic device that it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information a. New equipment would have to be acquired to produce the device. The equipment would cost $264,000 and have o six-year useful life. After six years, it would have a salvage value of about $24,000. b. Sales in units over the next six years are projected to be as follows: c. Production and sales of the device would require working copital of $59.000 to finance accounts receivable, inventories, and doy. e. Flxed 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.) f. To gain rapid entry into the market, the compony would have to advertise heavily. The advertising costs would be: 9. The company's required rate of return is 16%. Click here to view Exhibit 148-1 and Exhlbit 148-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device 2 . Using the dato computed in (1) above and other dato provided in the problem, determine the net present value of the proposed 2 investment. Would you recommend that Matheson accept the device as o new product? Complete this question by entering your answers in the tabs below. Would you recommend that Matheson accept the device as a new product? Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years. (Negative amounts should be indicated by a minus sign.)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Case 14.32 (Algo) Net Present Value Analysis of a New Product [LO14-2] George Matheson is the general manger of Nancy Pelosi Electronics who has just developed o new electronic device that it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information a. New equipment would have to be acquired to produce the device. The equipment would cost $264,000 and have o six-year useful life. After six years, it would have a salvage value of about $24,000. b. Sales in units over the next six years are projected to be as follows: c. Production and sales of the device would require working copital of $59.000 to finance accounts receivable, inventories, and doy. e. Flxed 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.) f. To gain rapid entry into the market, the compony would have to advertise heavily. The advertising costs would be: 9. The company's required rate of return is 16%. Click here to view Exhibit 148-1 and Exhlbit 148-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device 2 . Using the dato computed in (1) above and other dato provided in the problem, determine the net present value of the proposed 2 investment. Would you recommend that Matheson accept the device as o new product? Complete this question by entering your answers in the tabs below. Would you recommend that Matheson accept the device as a new product? Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years. (Negative amounts should be indicated by a minus sign.) 