Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $511,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Expected annual sales of new product	$	1,980,000
Expected annual costs of new product
Direct materials		460,000
Direct labor		679,000
Overhead (excluding straight-line depreciation on new machine)		336,000
Selling and administrative expenses		159,000
Income taxes		36	%

Required: 1. Compute straight-line depreciation for each year of this new machines life. 2. Determine expected net income and net cash flow for each year of this machines life. 3. Compute this machines payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machines accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the assets life.)

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Chapter 11 Homework Saved 13 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $511,000 cost with an expected four-year life and a $19,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) 5 points Skipped Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes $1,980,000 460,000 679,000 336,000 159,000 36% eBook Print Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute straight-line depreciation for each year of this new machine's life. Straight-line depreciation Required 1 Required 2 > 13 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) 5 points Complete this question by entering your answers in the tabs below. Skipped Required 1 Required 2 Required 3 Required 4 Required 5 eBook Determine expected net income and net cash flow for each year of this machine's life. Expected Net Income Revenues Print Expenses Expected Net Cash Flow 0 Required 1 Required 3 > Required 1 Required 2 Required 3 Required 4 Required 5 Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Choose Numerator: / Choose Denominator: Payback Period Payback period / = = 0 Required 1 Required 2 Required 3 Required 4 Required 5 Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year- end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) (Do not round intermediate calculations. Amounts to be deducted should be indicated by a minus sign.) Chart Values are Based on: n = i = % Cash Flow Select Chart Amount PV Factor = Present Value Annual cash flow $ 0 Residual value 0 Net present value