Problem 24-1A Computation of payback period, accounting rate of return, and net present value L P2, P3 Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a n a $860,000 cost with an expected four-year life and a $58,000 salvage value. All sales are for cash, and all except for depreciation on the new machine. Additional information includes the costs are out-of-pocket, following (PY of S1. EV of S1. PVA.of S1, and EVA.of S) (Use appropriate factors) from the tables provided. Round PV factor value to 4 decimal places.) Expected annual sales of new product Expected annual costs of new product 2,790,000 Direct materials birect 518,000 710,000 716,000 198,000 labor overhead (excluding straight-1ine depreciation on new machine Selling and administrative expenses Income taxes 301 Required: 1. Compute straight-line depreciation for eadh 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 5, Compute the net present value forthis machine using a discount rate of 4% 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) accounting rate of return, assuming that income is earned evenly throughout each year Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3Required 4 Required 5 Compute straight-line depreciation for each year of this new machine's life ation Required 2> 1 Required 1 8 Required 2 Required 3 | Required Required 5 | Determine expected net income and net cash flow for each year of this machine's life. ected Net Income Revenues Expenses Expected Net Cash Flow Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute this machine's payback period, assuming that cash flows occur evenly throughout each year Payback Period Choose Denominator:Payback Period Payback period Choose Numerator Required 2 Required 4 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3Requird4Required s Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year Accounting Rate of Return Choose Denominator Choose Numerator: g Rate of Return Accounting rate of return Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 t present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year. Compute the ne end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) (Do not round intermediate ducted should be indicated by a minus sign.) Chart Values are Based on: PV Factor Present Value Amount sh Flow Annual cash flow Residual value Select Chart Net present value Required 4
