TBQ Enterprises will add a new product (Product M) to its production. To manufacture Product M, the company will have to purchase a new machine costing $620,000. The machine has an expected life of four years and salvage value of $34,000. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round PV factor value to 4 decimal places.) $2,190,000 Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (excluding straight-line depreciation on new machine) Selling and administrative expenses Income taxes 494,000 686,000 476,000 174,000 30% Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required: 1. Compute straight-line depreciation for each year of this new machine's life. 2. Determine expected net income and net cash flow for each year of this machine's life. 3. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 4. Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. 5. Compute the net present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute straight-line depreciation for each year of this new machine's life. Straight-line depreciation Required 1 Required 2 Required 3 Required 4 Required 5 Determine expected net income and net cash flow for each year of this machine's life. Expected Net Income Revenues Expenses Expected Net Cash Flow Required 1 Required 3 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period 1 Choose Denominator: = Choose Numerator: Payback Period Payback period Required 2 Required 4 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 4 Compute this machine's accounting rate of return, assuming that income is earned evenly throughout each year. Accounting Rate of Return Choose Denominator: Choose Numerator: = = Accounting Rate of Return Accounting rate of return Required 1 Required 2 Required 3 Required 4 Required 5 Compute the net present value for this machine using a discount rate of 4% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the asset's life.) (Do not round intermediate calculations. Amounts to be deducted should be indicated by a minus sign.) Chart Values are Based on: Select Chart Amount x PV Factor - Present Value Cash Flow Annual cash flow Residual value - Net present value
