Answered step by step
Verified Expert Solution
Link Copied!

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

image text in transcribedimage text in transcribed

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 $515,000 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 Expected annual costs of new product $1,870,000 Direct materials Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes 455,000 678,000 338,000 170,000 32% Required 1. Compute straight-line depreciation for each year of this new machine's life 2. Determine expected net income and net cash flow for each year of this machine's life 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year 5. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year- end. (Hint Salvage value is a cash inflow at the end of the asset's life.) Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4Required 5 Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year unting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return Accounting rate of return Annual pre-tax income Annual average investment 534,000 X$ 26,700,000.00 %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Operations Management

Authors: David Loader

2nd Edition

0470026545, 978-0470026540

More Books

Students also viewed these Accounting questions