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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!
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
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