Beacon Company is considering automating its production facility. The initial investment in automation would be $8.49 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. 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 PA11-2 Part 5 Current (no automation) 86,000 Proposed (automation) 120,000 units units Net present value Per Unit $93 $ 19 20 8 47 $.46 Total $7 1,100,000. ? Per Unit $93 $ 19 2 8 7 $ 50 Total $7 2,230,000 > Required: 5. Recalculate the NPV using a 9 percent discount rate. (Euture Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.
Beacon Company is considering automating its production facility. The initial investment in automation would be $8.49 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. 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 PA11-2 Part 5 Current (no automation) 86,000 Proposed (automation) 120,000 units units Net present value Per Unit $93 $ 19 20 8 47 $.46 Total $7 1,100,000. ? Per Unit $93 $ 19 2 8 7 $ 50 Total $7 2,230,000 > Required: 5. Recalculate the NPV using a 9 percent discount rate. (Euture Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 5MAD: Home Garden Inc. is considering the construction of a distribution warehouse in West Virginia to...
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