Beacon Company is considering automating its production facility. The initial investment in automation would be $9.15 million, and the equipment has a useful life of 7 years with a residual value of $1,100,000. The company will use straight-line depreciation. Beacon could expect a production increase of 49,000 units per year and a reduction of 20 percent in the labor cost per unit.

Current (no automation)Proposed (automation) 77,000 units126,000 units Production and sales volumePer UnitTotalPer UnitTotal Sales revenue$97$ ?$97$ ? Variable costs Direct materials$15 $15 Direct labor 20 ? Variable manufacturing overhead 10 10 Total variable manufacturing costs 45 ? Contribution margin$52?$56? Fixed manufacturing costs $ 1,130,000 $ 2,230,000 Net operating income ? ?

4. Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (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.)