QUESTION 1
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 $479,000 cost with an expected four-year life and a $15,000 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 EVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product $1, 870, 090 Expected annual costs of new product Direct materials 495, 089 Direct labor 673,980 Overhead (excluding straight-line depreciation on new machine) 337, 080 Selling and administrative expenses 153, 909 Income taxes 34% Required: 1. Compute straight-line depreciation for each year of this new machine's life. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute straight-line depreciation for each year of this new machine's life. Straight-line depreciation 1. Compute straight-line depreciation 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 period. 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 8% 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 1 Required 2 Required 3 Required 4 Required 5 Determine expected net income and net cash flow for each year of this machine's life. Expected Net Income Revenues Expenses Expected Net Cash FlowFactor 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 $479,000 cost with an expected four-year life and a $15.000 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.) Expected annual sales of new product $1, 870, 090 Expected annual costs of new product Direct materials 495, 090 Direct labor 673,060 Overhead (excluding straight-line depreciation on new machine) 337,000 Selling and administrative expenses 153,090 Income taxes 34% Required: 1. Compute straight-line depreciation 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 period, 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 8% 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 1 Required 2 Required 3 Required 4 Required 5 Determine expected net income and net cash flow for each year of this machine's life. Expected Net Income Revenues Expenses
