Question

In: Accounting

I submitted this before, but the question wasn't fully answered/correct. Can you please try again? Matheson...

I submitted this before, but the question wasn't fully answered/correct. Can you please try again?

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:

a. New equipment would have to be acquired to produce the device. The equipment would cost $120,000 and have a six-year useful life. After six years, it would have a salvage value of about $18,000.

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

Year Sales in Units
1 6,000
2 11,000
3 13,000
4–6 15,000

c. Production and sales of the device would require working capital of $44,000 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.

d. The devices would sell for $45 each; variable costs for production, administration, and sales would be $25 per unit.

e. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $132,000 per year. (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 program would be:

Year Amount of Yearly
Advertising
1–2 $ 74,000
3 $ 53,000
4–6 $ 43,000

g. The company’s required rate of return is 15%.

Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the device for each year over the next six years.

2-a. Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

Solutions

Expert Solution

1)
Year 1 2 3 4 5 6
Sales in Units 6000 11000 13000 15000 15000 15000
Sales In Dollars @ $45 $270,000.00 $495,000.00 $585,000.00 $675,000.00 $675,000.00 $675,000.00
Less: Variable Expenses @ $25 $150,000.00 $275,000.00 $325,000.00 $375,000.00 $375,000.00 $375,000.00
Contribution margin $120,000.00 $220,000.00 $260,000.00 $300,000.00 $300,000.00 $300,000.00
Less: Fixed expenses:
Salaries and other ($132,000 - ($120,000 -$18000)/6) $115,000.00 $115,000.00 $115,000.00 $115,000.00 $115,000.00 $115,000.00
Advertising $74,000.00 $74,000.00 $53,000.00 $43,000.00 $43,000.00 $43,000.00
Total fixed expenses $189,000.00 $189,000.00 $168,000.00 $158,000.00 $158,000.00 $158,000.00
Net cash inflow (outflow) -$69,000.00 $31,000.00 $92,000.00 $142,000.00 $142,000.00 $142,000.00
2)
Initial Cash flow
Equipment -$120,000
Add: Net working Capital -$44,000.00
Cashflow at year 0 -$164,000
Cash flow at year 6 = $18000 + $142,000+ 44000 $204,000
Year Cash Flow PV @15% Present Value
0 -$164,000.00 1.000 -$164,000.00
1 -$69,000.00 0.870 -$60,000.00
2 $31,000.00 0.756 $23,440.45
3 $92,000.00 0.658 $60,491.49
4 $142,000.00 0.572 $81,188.96
5 $142,000.00 0.497 $70,599.10
6 $204,000.00 0.432 $88,194.83
NPV $99,914.83

Related Solutions

Hi, I submitted this question before, but it wasn't actually answered. I figured out 1 and...
Hi, I submitted this question before, but it wasn't actually answered. I figured out 1 and 2, but can you try the rest? I am unsure how to solve it. TufStuff, Inc., sells a wide range of drums, bins, boxes, and other containers that are used in the chemical industry. One of the company’s products is a heavy-duty corrosion-resistant metal drum, called the WVD drum, used to store toxic wastes. Production is constrained by the capacity of an automated welding...
This is previously answered wrong - hopefully someone can try again taking into account the risk...
This is previously answered wrong - hopefully someone can try again taking into account the risk free asset as well as Stock R and Stock S You have $10,000 to invest in a portfolio containing Stock R, Stock S, and a risk - free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15% and that has only 120% of the risk of the overall market. If Stock...
I posted this question before and the person who answered it answered wrong.........please have someone else...
I posted this question before and the person who answered it answered wrong.........please have someone else try again The following information applies to the questions displayed below.] O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations: Variable costs per unit: Manufacturing: Direct materials $28 Direct labor $15 Variable manufacturing overhead $5 Variable selling and administrative $3 Fixed costs per year: Fixed manufacturing overhead $580,000 Fixed selling and administrative...
There was a person who answered this before, please don't answer again. Your handwriting is illegable...
There was a person who answered this before, please don't answer again. Your handwriting is illegable and the topic is jobs in American, not India. To the next person answering this, please don't look up the answer on Chegg and give me the same answer the previous poster gave. THIS IS AN ESSAY QUESTION SO PLEASE ANSWER THOROUGHLY AND DESCRIBE WHY: From The Economic Way of Thinking Name three areas where US governments should concentrate as far as providing jobs.
12) Can you please see that the calculations are correct, this is my 3rd try with...
12) Can you please see that the calculations are correct, this is my 3rd try with this same question and I've paid for every attempt. Thank you. A bicycle manufacturer currently produces 349,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $1.90 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production...
Question 4 Your answer is partially correct. Try again. The condensed financial statements of Wildhorse Co....
Question 4 Your answer is partially correct. Try again. The condensed financial statements of Wildhorse Co. for the years 2019 and 2020 are presented below. WILDHORSE CO. Balance Sheets December 31 (in thousands) 2020 2019 Current assets    Cash and cash equivalents $330 $360    Accounts receivable (net) 550 480    Inventory 660 590    Prepaid expenses 130 160      Total current assets 1,670 1,590 Property, plant, and equipment (net) 410 380 Investments 90 90 Intangibles and other assets 530 510      Total assets $2,700 $2,570...
Hi, the person who answered this before did it wrong. Can you please show me the...
Hi, the person who answered this before did it wrong. Can you please show me the formulas of how to answer this. Hi-Tek Manufacturing Inc. makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown below: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,718,000 Cost of goods sold 1,220,369 Gross margin 497,631 Selling and administrative expenses 650,000 Net operating loss $ (152,369) Hi-Tek produced and sold 60,300...
I posted this question before too but answer was wrong can you please make sure the...
I posted this question before too but answer was wrong can you please make sure the answer is right Required information [The following information applies to the questions displayed below.] In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 2,204,000 $ 3,192,000 $ 2,424,400 Estimated costs...
Please try to type your solution for this question, so I can read it without a...
Please try to type your solution for this question, so I can read it without a problem. I truly appreciate you for typing in advance. The Question: An FBI survey shows that about 80% of all property crimes go unsolved. Suppose that in your town 3 such crimes are committed and they are each deemed independent of each other. X is the number of crimes will be solved in your town. Complete the table below for the probability mass function...
Please try to type your solution for this question, so I can read it without a...
Please try to type your solution for this question, so I can read it without a problem. I truly appreciate you for typing in advance. The Question: For some Mechanical Engineer students, data for 224 student’s GPAs in their first 4 semesters of college were compared using several predictors, namely HSM, HSS, HSE, SATM, and SATV. Here significant level α is 0.05. Then, the researcher fit a regression model and got the following results (intercept is included in the model):...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT