11L-10

Required information {The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $7.46 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 83,000 units Per Unit Total $ 99 $ 2 Proposed (automation) 130,000 units Per Unit Total $ 99 $ ? Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 16 15 11 42 $ 57 $ 16 2 11 2 $ 60 2 $ 1,210,000 2 ? $ 2,200,000 ? 5. Recalculate the NPV using a 10 percent discount rate. (Future Value of $1. Present Value of $1, Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Net present value