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Beacon Company is considering automating its production facility. The initial investment in automation would be $$11\mathrm{.}82$ million, and the equipment has a useful life of $10$ years with a residual value of $$1,020,000.$ The company will use straight$-$line depreciation. Beacon could expect a production increase of $41,000$ units per year and a reduction of $20$ percent in the labor cost per unit.

Current $($no automation$)$ Proposed $($automation$)$

$84,000$ units $125,000$ units

Production and sales volume Per Unit Total Per Unit Total

Sales revenue $ $94$ $ $?$ $ $94$ $ $?$

Variable costs

Direct materials $ $16$ $ $16$

Direct labor $25?$

Variable manufacturing overhead $1212$

Total variable manufacturing costs $53?$

Contribution margin $ $41?$ $ $46?$

Fixed manufacturing costs $ $1,230,000$ $ $2,300,000$

Net operating income $??$

$3.$ Determine the project's payback period.