Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 $507,000 cost with an expected four-year life and a $19,000 salvage value. Additional annual information for this new product line follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product $ 1,850,000 Expenses Materials, labor, and overhead (except depreciation) 1,509,000 Depreciation Machinery 122,000 Selling, general, and administrative expenses 178,000 Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's life. Expected Income Revenues Expenses Expected Net Cash Flow Net cash flow Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Denominator: Numerator: 1 Payback Period = Required 1 Required 2 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.). Chart Values are Based on: n = = % Select Chart Amount PV Factor Present Value Cash Flow Annual cash flow Salvage value II Net present value
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started