Problem 26-1A (Algo) Payback period, net present value, and net cash flow calculation LO P1, 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 $507,000 cost with an expected four-year life and a $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) $ 1,950,000 Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery Selling, general, and administrative expenses 1,495,000 124, 250 147,000 Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. Required 1 Required 2. Required 3 Determine income and net cash flow for each year of this machine's life. Income Cash Flow $ 1,950,000 $ 1,950,000 Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) DepreciationMachinery Selling, general, and administrative expenses Income Net cash flow 1,495,000 124,250 147,000 183,750 1,495,000 164,250 X 147,000 $ $ 143,750 Required 1 Required 2 Required 3 Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Numerator: 1 Denominator: Initial investment / Annual net cash flow = Payback Period 507,000 0 Required 1 Required 2 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Net Cash Flows Present Value at 7% Present Value of Net Cash Flows = $ 0 Years 1-4 Salvage value, year 4 Total 0 = Net present value