3. Determine the project's Payback Period

Payback Period

Years

Beacon Company is considering automating its production facility. The initial Investment in automation would be $15 million, and the equipment has a useful life of 10 years with a residual value of $500,000. The company will use straight-line depreciation. Beacon could expect a production Increase of 40.000 units per year and a reduction of 20 percent in the labor cost per unit Current (no automation) 88,880 units Per Total Unit $ 90 Proposed (automation) 120,000 units Per Production and sales volume Total Unit $90 $ 18 $ 18 Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income 10 $ 42 $ 1,25e. $ 2,350,000 2 Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting Rate of Return