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 $487,000 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	$	1,960,000
Expected annual costs of new product
Direct materials		460,000
Direct labor		677,000
Overhead (excluding straight-line depreciation on new machine)		336,000
Selling and administrative expenses		172,000
Income taxes		38	%

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3
• Required 4
• Required 5

Determine expected net income and net cash flow for each year of this machines life.

Expected Net Income
Revenues
Sales
Expenses
Direct materials
Direct labor
Overhead excluding straight-line depreciation on new machine
Selling and administrative expenses
Straight-line depreciation on new machine
Income tax expense
		0
Expected Net Cash Flow
0

Compute this machines payback period, assuming that cash flows occur evenly throughout each year.

Payback Period
Choose Numerator:	/	Choose Denominator:	=	Payback Period
	/		=	Payback period
			=	0

Compute this machines accounting rate of return, assuming that income is earned evenly throughout each year.

Accounting Rate of Return
Choose Numerator:	/	Choose Denominator:	=	Accounting Rate of Return
	/		=	Accounting rate of return
				0

Compute the net present value for this machine using a discount rate of 8% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the assets 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	x	PV Factor	=	Present Value
Annual cash flow					=	$0
Residual value					=	0
	Net present value