Question
Beacon Company is considering automating its production facility. The initial investment in automation would be $6.23 million, and the equipment has a useful life of
Beacon Company is considering automating its production facility. The initial investment in automation would be $6.23 million, and the equipment has a useful life of 5 years with a residual value of $1,030,000. 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.
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1. Determine the project's accounting rate of return. (Round your answer to 2 decimal places. 2.Determine the project's payback period. (Round your answer to 2 decimal places.) 3.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.) 4.Recalculate the NPV using a 9% 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.)
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