need help solving problem. can you use the same format. Problem 24-1A Computatio
ID: 2436929 • Letter: N
Question
need help solving problem. can you use the same format.
Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 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 $519,000 cost with an expected four-year life and a $15,000 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. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Expected annual sales of new product Expected annual costs of new product $1,860,000 pute Direct materials Direct labor 465.000 675,000 Overhead (excluding straight-line depreciation on new machine) 338,000 Selling and administrative expenses Income taxes 165,000 32% Required 1. Compute straight-line depreciation for each year of this new machine's lifeExplanation / Answer
1)Depreciation= [519000-15000]/4=126000
2)
net cash flow = 61880+ 126000 =187880
3)payback period= 519000/187880 = 2.76
4)Average investment = [519000+15000]/2= 267000
Accounting rate of return = 61880/267000
= .2318 or 23.18%
5)n=4
i=7%
Present value of annuity =[PVA 7%,4 *Annual cash flow]
= [3.38721*187880]
= 636389.01
present value of residual value =PVF 7%,4*Salvage
= .76290*15000
= 11443.5
Total present value of cash inflow =647832.51
present value of cash outflow =(519000)
net present value = 128832.51
Net sales 1860000 less: Direct material 465000 Direct labor 675000 overhead 338000 selling and administration expense 165000 depreciation 126000 Total expense 1769000 Income before tax 91000 less:Tax [ 91000*.32] (29120) Net income 61880Related Questions
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