[The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $11.60 million, and the equipment has a useful life of 9 years with a residual value of $1,160,000. The company will use straight-line depreciation. Beacon could expect a production increase of 45,000 units per year and a reduction of 20 percent in the labor cost per unit.

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

	Current (no automation)			Proposed (automation)
	78,000 units			123,000 units
Production and sales volume	Per Unit		Total	Per Unit		Total
Sales revenue	$	98	$ ?	$	98	$ ?
Variable costs
Direct materials	$	16		$	16
Direct labor		20			?
Variable manufacturing overhead		10			10
Total variable manufacturing costs		46			?
Contribution margin	$	52	?	$	56	?
Fixed manufacturing costs			$ 1,250,000			$ 2,300,000
Net operating income			?			?

1-b. Does Beacon Company favor automation?

• Yes

• No

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 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