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Required information

PA$11-2($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 straightline 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.

$\backslash$table$[[$Production and sales volume,$\backslash$table$[[$Current $($no automation$)],[80,000$ units$]],\backslash$table$[[$Proposed $($automation$)],[120,000$ units$]]],[$Per Unit,Total,Per Unit,Total$],[$Sales revenue,$$90,$$$?,$$$90,$$ $?],[$Variable costs,,,,$],[$Direct materials,$$18,,$$$18,],[$Direct labor,$25,,?,],[$Variable manufacturing overhead,$10,,10,],[$Total variable manufacturing costs,$53,,?,],[$Contribution marqin,$$37,?,$$$42,?],[$Fixed manufacturing costs,,$1,250,000,,2,350,000],[$Net operating income,,?,,?$]]$

PA$11-2$ Part $4$

Required:

$4.$ Using a discount rate of $15$ percent, calculate the net present value $($NPV$)$ of the proposed investment. $($Future Value of $$1,$ Present Value of $$1,$ Future Value Annuity of $$1,$ Present Value Annuity of $$1.)$

Note: Use appropriate factor$($s$)$ from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.

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