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 $7.25 million, and the equipment has a useful life of 6 years with a residual value of $1,190,000. The company will use straight-line depreciation. Beacon could expect a production increase of 48,000 units per year and a reduction of 20percent in the labor cost per unit.

	Current (no automation)			Proposed (automation)
	76,000 units			124,000 units
Production and sales volume	Per Unit		Total	Per Unit		Total
Sales revenue	$	93	$ ?	$	93	$ ?
Variable costs
Direct materials	$	20		$	20
Direct labor		25			?
Variable manufacturing overhead		11			11
Total variable manufacturing costs		56			?
Contribution margin	$	37	?	$	42	?
Fixed manufacturing costs			$ 1,060,000			$ 2,270,000
Net operating income			?			?

1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.)

2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)

3. Determine the project's payback period. (Round your answer to 2 decimal places.)

4. Using a discount rate of 15 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.)

5. Recalculate the NPV using a 10 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.)

Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.) Current (no automation) 76,000 units Per Unit Total $ 93 $ 7,068,000 Proposed (automation) 124,000 units Per Unit Total $ 93 $ 11,532,000 $ $ 20 25 20 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 56 511 $ 42 $ $ 2,812,000 1,060,000 1,752,000 $ $ 5,208,000 2,270,000 2,938,000 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Accounting rate of return 4.05 % 3. Determine the project's payback period. (Round your answer to 2 decimal places.) Payback period 5.00 years 4. Using a discount rate of 15 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 10 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