Beacon Company is considering automating its production facility. The initial investment in automation would be $7.81 million, and the equipment has a useful life of 6 years with a residual value of $1,090,000. The company will use straight-line depreciation. Beacon could expect a production increase of 41,000 units per year and a reduction of 20 percent in the labor cost per unit.

Current (no automation)		Proposed (automation)
	72,000	units	113,000	units
Production and Sales Volume	Per Unit	Total	Per Unit	Total
Sales revenue	$100	$7,200,000	$100	$11,300,000
Variable costs
Direct materials	$17		$17
Direct labor	25		20
Variable manufacturing overhead	10		10
Total variable manufacturing costs	52		47
Contribution margin	$48	3,456,000	$53	5,989,000
Fixed manufacturing costs		$1,150,000		$2,200,000
Net operating income		$2,306,000		$3,789,000

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

3. Determine the project's payback period.

4. Using a discount rate of 13 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.)

5. Recalculate the NPV using a 8 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.)