24-1A Computing payback period, accounting rate of return, and net present value LO P1, P2, P3 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $495,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket. except for depreciation on the new machine. Additional information includes the following. (PV of $1. EV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product $1,840,000 Expected annual costs of new product Direct materials 480,000 Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes 675,000 337,000 159,000 341 Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of returg, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end. (Hint Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) (Do not round intermediate calculations. Amounts to be deducted should be indicated by a minus sign.) Cash Flow Annual cash flow Residual value Chart Values are Based on: Select Chart Net present value % Amount x PV Factor Present Value ok Problem 24-1A Computing payback period, accounting rate of return, and net present value LO P1, P2. P3 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine a $495,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1. FV of $1. PVA of $1, and EVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes $1,840,000 480,000 675,000 337,000 159,000 34% Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end (Hint: Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. Accounting Rate of Return Choose Denominator: Choose Numerator: Annual after-tax net income , Annual average investment Accounting Rate of Return Accounting rate of retur 0 Problem 24-1A Computing payback period, accounting rate of return, and net present value P3 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a r a $495,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are ou except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1 $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes $1,840,000 480,000 675,000 337,000 159,000 344 Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at e (Hint Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute this machine's payback perio, assuming that cash flows occur evenly throughout each year. Payback Period Choose Numerator: 1 Cost of investment Choose Denominator: Annual net cash flow Payback Period Payback period $ 495,000/ = 0 Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at eac (Hint: Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Determine expected net income and net cash flow for each year of this machine's life. Expected Net Income Revenues Sales Expenses Direct labor Direct materials Overhead excluding straight-line depreciation on new machine Selling and administrative expenses Straight-line depreciation on new machine Total expenses Income before taxes i Expected Net Cash Flow 0 Straight-line depreciation on new machine Net income $ (675,000) (480,000) (337,000) (159,000) (116,000) $ 1,840,000 (1,767,000) 1 Problem 24-1A Computing payback period, accounting rate of return, and net present value LO P1, P2, P3 Book Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $495,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket. except for depreciation on the new machine. Additional information includes the following. (PV of $1. FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product Expected annual costs of new product Overhead (excluding straight-line depreciation on new machine) Direct materials Direct labor Selling and administrative expenses Income taxes $1,840,000 480,000 675,000 337,000 159,000 348 Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end. (Hint Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute straight-line depreciation for each year of this new machine's life. Straight-line depreciation $ 119,000 Required T Required 2 >