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 $$138,000$ and have a 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 capital of $$46,000$ 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 $$55$ each; variable costs for production, administration, and sales would be $$35$ per unit.

e$.$ Fixed costs for salaries, maintenance, property taxes, insurance, and straight$-$line depreciation on the equipment would total

$$149,000$ 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 costs would be:

g$.$ The company's required rate of return is $13\%.$

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