Factor Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $511,000 cost with an expected four-year life and a $19,000 salvage value. 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.)
|
|
|
|
Expected annual sales of new product |
$ |
1,930,000 |
|
Expected annual costs of new product |
|
|
|
Direct materials |
|
480,000 |
|
Direct labor |
|
673,000 |
|
Overhead (excluding straight-line depreciation on new machine) |
|
335,000 |
|
Selling and administrative expenses |
|
163,000 |
|
Income taxes |
|
40 |
% |
|
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 7% 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.)
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Extracted text: Requlred: 1. Compute stralght-line depreclation 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 perlod, 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 7% and assuming that cash flows occur at eac (Hint. Salyage 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 nces Compute straight-line depreciation for each year of this new machine's life. Straight-line depreciation Required 2 > Prey 1 of 9 Next> 586134 44532 109 144270927 20554jpg 144651215 70437. jpg 144819707 12943 ipg O Type here to search L Fi FZ FO F4 F6 F7 Fe F0 C@ %23 %24 & 3 5 6 7 8 T Y U PR 64 LL