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 $7.47 million, and the equipment has a useful life of 6 years with a residual value of $1,050,000. The company will use straight- line depreciation. Beacon could expect a production increase of 45,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 82,000 units Per Unit Total $ 91 Proposed (automation) 127,000 units Per Unit Total $ 91 $ ? $ ? $ 19 $ 19 20 ? 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 10 10 49 $ 42 ? $ 46 $ 1,050,000 $ 2,200,000 PA11-2 Part 4 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.) (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 $ 10,853,413 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.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Answer is complete but not entirely correct. Net present value $ 13,667,655 X