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 $880,000 cost with an expected four-year life and a $60,000 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. Round PV factor value to 4 decimal places.)

Expected annual sales of new product

$

2,840,000

Expected annual costs of new product

Direct materials

520,000

Direct labor

712,000

Overhead (excluding straight-line depreciation on new machine)

736,000

Selling and administrative expenses

200,000

Income taxes

30

%

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 3% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the assets life.)

Factor is and EVAof on the new machine 712,000 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, a 4. Compute this machine's accounting rate of return, assming t 5. Compute the net present value (Hint Salvage value is a cash inflow at the end of the asset's life.) ming that cash flows occur evenly throughout each year 30% 1. Compute straight-line depreciation for each year of this new machine's life d net income and net cash flow for each year of this machine's life 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year ute the net present value for this using a discount rate of 3% and assuming that cash flows occur at each ye that cash flows occur evenly t each year e this machine's ac e the net present value for this machine using a discount rate of 3% 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.) Of 396 and a