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 $8.77 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight-line depreciation. Beacon could expect a production increase of 35,000 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) 117,000 units Per Unit Total $ 91 $ 18 15 $ 18 ? 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 41 $ 50 ? $ 53 $ 1,070,000 ? ? $ 2,160,000 ? PA11-2 Part 1 Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.) Current (no automation) Proposed (automation) 117,000 units 82,000 units Production and Sales Volume Per Unit Total Per Unit Total Sales revenue $ 91 $ 91 Variable costs Direct materials $ 18 $ 18 15 8 41 Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 50 $ 53 $ 1,070,000 $ 2,160,000 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting rate of return % 3. Determine the project's payback period. (Round your answer to 2 decimal places.) Payback period years 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 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.) Net present value TABLE 11.1A Future Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0 1.0000 1.0000 10000 10000 10000 10000 10000 1.0000 1.0000 1 1.0200 1.0300 1.0375 1.0400 1.0425 1.0500 1.0600 1.0700 1.0800 2. 1.0404 1.0609 1.0764 1.0816 1.0868 1.1025 1.1236 1.1449 1.1664 3 1.0612 1.0927 1.1168 1.1249 1.1330 1.1576 1.1910 1.2250 1.2597 4 1.0824 1.1255 1.1587 1.1699 1.1811 1.2155 1.2625 1.3108 1.3605 1.1041 1.1593 1.2021 1.2167 1.2313 1.2763 1.3382 1.4026 1.4693 6 1.1262 1.1941 1.2472 1.2653 1.2837 1.3401 1.4185 1.5007 1.5869 7 1.1487 1.2299 12939 1.3159 1.3382 1.4071 1.5036 1.6058 1.7138 00 1.1717 1.2668 1.3425 13686 1.3951 1.4775 1.5938 1.7182 1.8509 9 1.1951 1.3048 1.3928 1.4233 1.4544 1.5513 1.6895 1.8385 1.9990 10 1.2190 1.3439 1.4450 1.4802 1.5162 1.6289 1.7906 1.9672 2.1589 20 1.4859 1.8061 2.0882 2.1911 2.2989 2.6533 3.2071 3.8697 4.6610 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0 1.0000 10000 10000 10000 10000 10000 1.0000 1.0000 1.0000 1 1.0900 1.1000 1.1100 1.1200 1.1300 1.1400 1.1500 1.2000 1.2500 1.1881 1.2100 1.2321 1.2544 1.2769 1.2996 1.3225 1.4400 1.5625 N 1.2950 1.3310 1.3676 1.4049 1.4429 1.4815 1.5209 1.7280 1.9531 w 4 1.4116 1.4641 1.5181 1.5735 1.6305 1.6890 1.7490 2.0736 2.4414 5 1.5386 1.6105 1.6851 1.7623 1.8424 1.9254 2.0114 2.4883 3.0518 6 1.6771 1.7716 1.8704 1.9738 2.0820 2.1950 2.3131 2.9860 3.8147 7 1.8280 1.9487 2.0762 2.2107 2.3526 2.5023 2.6600 3.5832 4.7684 00 1.9926 2.1436 2.3045 2.4760 2.6584 2.8526 3.0590 4.2998 5.9605 9 2.1719 2.3579 2.5580 2.7731 3.0040 3.2519 3.5179 5.1598 7.4506 2.3674 2.5937 2.8394 3.1058 3.3946 3.7072 4.0456 6.1917 9.3132 10 20 5.6044 6.7275 8.0623 9.6463 11.5231 13.7435 16.3665 38.3376 86.7362 TABLE 11.3A Future Value of an Annuity of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 2 2.0200 2.0300 2.0375 2.0400 2.0425 2.0500 2.0600 2.0700 2.0800 3 3.0604 3.0909 3.1139 3.1216 3.1293 3.1525 3.1836 3.2149 3.2464 4 4.1216 4.1836 4.2307 4.2465 4.2623 4.3101 4.3746 4.4399 4.5061 5 5.2040 5.3091 5.3893 5.4163 5.4434 5.5256 5.6371 5.7507 5.8666 6 6.3061 6.4684 6.5914 6.6330 6.6748 6.8019 6.9753 7.1533 7.3359 7 7.4343 7.6625 7.8386 7.8983 7.9585 8.1420 8.3938 8.6540 8.9228 00 8.5830 8.8923 9.1326 9.2142 9.2967 9.5491 9.8975 10.2598 10.6366 9 9.7546 10.1591 10.4750 10.5828 10.6918 11.0266 11.4913 11.9780 12.4876 10 10.9497 11.4639 11.8678 12.0061 12.1462 12.5779 13.1808 13.8164 14.4866 20 24.2974 26.8704 29.0174 29.7781 30.5625 33.0660 36.7856 40.9955 45.7620 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 2 2.0900 2.1000 2.1100 2.1200 2.1300 2.1400 2.1500 2.2000 2.2500 3 3.2781 3.3100 3.3421 3.3744 3.4069 3.4396 3.4725 3.6400 3.8125 4 4.5731 4.6410 4.7097 4.7793 4.8498 4.9211 4.9934 5.3680 5.7656 01 5.9847 6.1051 6.2278 6.3528 6.4803 6.6101 6.7424 7.4416 8.2070 6 7.5233 7.7156 7.9129 8.1152 8.3227 8.5355 8.7537 9.9299 11.2588 7 9.2004 9.4872 9.7833 10.0890 10.4047 10.7305 11.0668 12.9159 15.0735 8 11.0285 11.4359 11.8594 12.2997 12.7573 13.2328 13.7266 16.4991 19.8419 9 13.0210 13.5975 14.1640 14.7757 15.4157 16.0853 16.7856 20.7989 25.8023 10 15.1929 15.9374 16.7220 17.5487 18.4197 19.3373 20.3037 25.9587 33.2529 20 51.1601 57.2750 64.2028 72.0524 80.9468 91.0249 102.4436 186.6880 342.9447 There is one payment each period. TABLE 11.2A Present Value of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 2 0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573 3 0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938 4 0.9238 0.8885 0.8631 0.8548 0.8466 0.8227 0.7921 0.7629 0.7350 5 0.9057 0.8626 0.8319 0.8219 0.8121 0.7835 0.7473 0.7130 0.6806 6 0.8880 0.8375 0.8018 0.7903 0.7790 0.7462 0.7050 0.6663 0.6302 7 0.8706 0.8131 0.7728 0.7599 0.7473 0.7107 0.6651 0.6227 0.5835 8 0.8535 0.7894 0.7449 0.7307 0.7168 0.6768 0.6274 0.5820 0.5403 9 0.8368 0.7664 0.7180 0.7026 0.6876 0.6446 0.5919 0.5439 0.5002 10 0.8203 0.7441 0.6920 0.6756 0.6595 0.6139 0.5584 0.5083 0.4632 20 0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 0.2145 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000 2 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.6944 0.6400 3 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.5787 0.5120 4 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.4823 0.4096 5 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 0.3277 6 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621 7 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.2791 0.2097 00 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678 9 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.1938 0.1342 10 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.1615 0.1074 20 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0261 0.0115 TABLE 11.4A Present Value of Annuity of $1 Periods 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 1 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 1.9416 1.9135 1.8929 1.8861 1.8794 1.8594 1.8334 1.8080 1.7833 N 3 2.8839 2.8286 2.7883 2.7751 2.7620 2.7232 2.6730 2.6243 2.5771 4 3.8077 3.7171 3.6514 3.6299 3.6086 3.5460 3.4651 3.3872 3.3121 5 4.7135 4.5797 4.4833 4.4518 4.4207 4.3295 4.2124 4.1002 3.9927 6 5.6014 5.4172 5.2851 5.2421 5.1997 5.0757 4.9173 4.7665 4.6229 7 6.4720 6.2303 6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5.2064 00 73255 70197 6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466 9 8.1622 7.7861 7.5208 7.4353 7.3513 71078 6.8017 6.5152 6.2469 10 8.9826 8.5302 8.2128 8.1109 8.0109 7.7217 7.3601 70236 6.7101 20 16.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181 Periods 9% 10% 11% 12% 13% 14% 15% 20% 25% 1 0.9174 0.9091 0.9009 0.8929 0.8550 0.8772 0.8696 0.8333 0.8000 2 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.5278 1.4400 3 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.1065 1.9520 4 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.5887 2.3616 5 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 2.9906 2.6893 6 4.48594.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.3255 2.9514 7 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 3.6046 3.1611 00 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 3.8372 3.3289 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.0310 3.4631 9 10 20 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.1925 3.5705 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 4.8696 3.9539 *There is one payment each period