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 $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1. FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery. Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign. Round your present value factor to 4 decimals and final answers to the nearest whole dollar) Years 1-4 Salvage value, year 4 Total Initial investment Net present value $ $ Net Cash Flows 351,000 X 10,000 X < Required 2 Present Value at 7% 0.7629 - $ 1,990,000 1,468,000 125, 250 171,000 ✓= N Present Value of Net Cash Flows S Required 3> 267,778 0
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 $10,000 salvage value. Additional annual information for this new product line follows. (PV of $1. FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Machinery. Selling, general, and administrative expenses Required: 1. Determine income and net cash flow for each year of this machine's life. 2. Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 3. Compute net present value for this machine using a discount rate of 7%. Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute net present value for this machine using a discount rate of 7%. (Do not round intermediate calculations. Negative amounts should be entered with a minus sign. Round your present value factor to 4 decimals and final answers to the nearest whole dollar) Years 1-4 Salvage value, year 4 Total Initial investment Net present value $ $ Net Cash Flows 351,000 X 10,000 X < Required 2 Present Value at 7% 0.7629 - $ 1,990,000 1,468,000 125, 250 171,000 ✓= N Present Value of Net Cash Flows S Required 3> 267,778 0
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 18E
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