Beacon Company is considering automating its production facility. The initial investment in automation would be $9.27 million, and the equipment has a useful life of 7 years with a residual value of $1,010,000. The company will use straight-line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit.

• Investment in Automation Equipment =	9,270,000
  Less: Salvage value	1,010,000
  Depreciable value	8,260,000
  Useful life in years	7
  Annual SL depreciation =$8.26M/7=	1,180,000
  So Fixed Mfg Overhead will increase by $1,180,000 under
  Automation.

  	Particulars	Current ( no automation)	Proposed (automation )	Remarks
  	Per unit	Total	Per unit	Total
  	Production and Sales Volume		90,000		126,000	Increase of 36,000 units
  a	Sales Revenue	$ 93.00	8,370,000	$ 93.00	11,718,000
  	Variable costs
  b	Direct Materials	$ 20	$ 1,800,000	$ 20	$ 2,520,000
  c	Direct Labor	$ 20	$ 1,800,000	$ 16	$ 2,016,000	20% reduction in labor cost per unit in automation
  d	Variable Manufacturing Overhead	$ 12	$ 1,080,000	$ 12	$ 1,512,000
  e	Total Variable Manufacturing costs=b+c+d=	$ 52	$ 4,680,000	$ 48	$ 6,048,000
  f	Contribution Margin=a-e=	$ 41.00	3,690,000	$ 45.00	5,670,000
  g	Fixed Manufacturing costs		$ 1,150,000		$ 2,330,000	Addition of Automation Equipment depreciation of $1.18M annually
  h	Net Operating Income =f-g=		$ 2,540,000		$ 3,340,000

  -Determine the project's accounting rate of return. _____% (Round your answer to 2 decimal places.)

-Determine the project's payback period. _______ years

-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.) NPV _________.

-Recalculate the NPV using a 9 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.) NPV ____________.