Cocoa and Cookies Inc. is planning to add a new product to its line. To manufacture this product, the company will
need to purchase a new machine costing $820,000 with an expected 10-year useful life and a $70,000 salvage value.
For this company, all sales are for cash and all costs are out-of-pocket, except for depreciation on the new machine.
Sales and cost information:
Expected annual sales of
new product
$ 11.635,400
Expected annual costs
of new product:
Direct Materials
$2.283.000
Direct Labor
$5.360,000
Overhead (does not
include depreciation)
$1,025,000
Selling, General, and
Administrative Expenses
$2,145,000
Income Tax Rate
21%
Required:
1. Compute annual straight-line depreciation for the new machine.
2. Determine net income for each year.
3. Determine net cash flow for each year.
4. Compute the machine's payback period, assume cash flows occur evenly.
5. Compute the accounting ratel of return.
6. Compute net present value assuming a 8% discount rate.
PLEASE do not show work through a table. please show work with formulas and traditional methods used in classes. no excel sheets.
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