Required information [The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $12.14 million, and the equipment has a useful life of 10 years with a residual value of $1,040,000. The company will use straight-line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no Proposed automation) (automation) 84,000 units 131,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $91 $ ? $91 $ ? Variable costs Direct materials $19 $19 Direct labor 15 Variable manufacturing 9 9 overhead Total variable 43 manufacturing costs ? Contribution margin $48 ? $51 ? Fixed manufacturing costs $ 1,050,000 2,290,000 Net operating income ? ? 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Answer is complete but not entirely Accounting rate of return 21.38% Required information [The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $12.14 million, and the equipment has a useful life of 10 years with a residual value of $1,040,000. The company will use straight-line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no Proposed automation) (automation) 84,000 units 131,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $91 $ ? $91 $ ? Variable costs Direct materials $19 $19 Direct labor 15 ? Variable manufacturing 9 9 overhead Total variable 43 ? manufacturing costs Contribution margin $48 ? $51 ? $ $ Fixed manufacturing costs 1,050,000 2,290,000 Net operating income ? ? 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.) Answer is complete but not Net present $ 4,466,238% value Required information [The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $12.14 million, and the equipment has a useful life of 10 years with a residual value of $1,040,000. The company will use straight-line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. $91 $ ? Current (no Proposed automation) (automation) 84,000 units 131,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $91 $ ? Variable costs Direct materials $19 $19 Direct labor 15 ? Variable manufacturing 9 9 overhead Total variable 43 ? manufacturing costs Contribution margin $48 ? $51 ? Fixed manufacturing costs 1,050,000 2,290,000 Net operating income ? ? 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.) X Answer is complete but not Net present value $ 4,466,238 X
