Item6

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Item6

Item 6 2.14 points

Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1, P2, P3

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.)

Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1 P2, P3 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 depreclation on the new machine. Additional Information Includes the following. (PV of $1. FV of $1. PVA f $1, and FVA of $1) (Use approprlate factor(s) from the tables provlded. Round PV factor value to 4 declmal places.) Expected annual sales of new product Expected annual costs of new product $2,848,99e Direct materials Direct labor Overhead (excluding straight-1ine depreciation on new machine) Selling and administrative expenses Income taxes 528,99e 712,998 736,0ee 290,99e 38% Required 1. Compute straight-line depreclation 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 perlod, 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 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.) Complete this question by entering your answers in the tabs below Required 1Required 2Required 3 Required 4 Required 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 asset's life.) (Do not round intermediate calculations. Amounts to be deducted should be indicated by a minus sign.) Chart Values are Based on 396 ash Flow Select Chart Amount xi PV Factor |=| Present Value Annual cash fow Present Value of an Annuity of 1 531,900x 0.00 0.00 0.00 60,000x Residual value Present Value of 1 Present value of cash inflows Present value of cash outflows Net present value Required 5 Required 4