Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I'm trying to figure out the NPV using 10 percent discount rate. Added the table I've filled out already to help. Thank you! nformation PA11-2

I'm trying to figure out the NPV using 10 percent discount rate. Added the table I've filled out already to help. Thank you!
image text in transcribed
image text in transcribed
nformation PA11-2 (Static) Making Automation Decision (LO 11-1, 11-2, 11-3, 11-5) [The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $15 million, and the equipment has a useful life of 10 years with a residual value of $500,000. The company will use straight-line depreciation. Beacon could expect a production increase of 40,000 units per year and a reduction of 20 percent in the labor cost per unit Current (no automation) 80,000 units Per Total Unit $ 90 $ ? Proposed (automation) 120,000 units Per Total Unit $ 90 $ 2 Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 18 25 10 53 $ 37 $ 18 ? 10 ? $ 42 ? $ 1,250,000 ? $ 2,350,000 ? PA11-2 Part 5 5. Recalculate the NPV using a 10 percent discount rate (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Enter the answer in whole dollars.) Net present value $ (8,935,495) Current (no automation) Proposed (automation) 80,000 units 120,000 units Per Unit Total Per Unit Total $ 90 $ 7,200,000 $ 90 $ 10,800,000 $ 18 $ 18 25 18 Production and Sales Volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income 20 10 10 53 48 37 42 2,960,000 $ $ 1,250,000 $ 1.710,000 5,040,000 $ 2,350,000 $ 2,690,000

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

Financial Accounting in an Economic Context

Authors: Jamie Pratt

8th Edition

9781118139424, 9781118139431, 470635290, 1118139429, 1118139437, 978-0470635292

More Books

Students also viewed these Accounting questions