Required information PA11-2 (Algo) 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 $8.99 million, and the equipment has a useful life of 7 years with a residual value of $1,080,000. The company will use straight- line depreciation. Beacon could expect a production increase of 30,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 76,000 Proposed (automation) 106,000 units Per Unit $ 98 Total $ ? units Per Unit $ 98 Total $ ? $ 20 $ 20 20 ? 9 9 49 , $ 49 ? $ 53 1,190,000 ? ? 2,250,000 ? Complete the following table showing the totals. Note: Enter your answers in whole dollars, not in millions. Current (no automation) Proposed (automation) 106000 units PA11-2 Part 2 76000 units Production and Sales Volume Per Unit Total Per Unit Total Sales revenue $ 98 $ 98 Variable costs Direct materials Direct labor $ 20 $ 20 20 Variable manufacturing overhead 9 9 Total variable manufacturing costs 49 Contribution margin $ 49 $ 53 Fixed manufacturing costs 1,190,000 Net operating income 2,250,000 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places. Accounting rate of return Required: % 3. Determine the project's payback period. Note: Round your answer to 2 decimal places. PA11-2 Part 4 Payback period years Required: 4. Using a discount rate of 14 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. Net present value PA11-2 Part 5 Required: 5. Recalculate the NPV using a 9 percent discount rate. (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. Net present value