6. Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $12.39 million, and the equipment has a useful life of 10 years with a residual value of $1,090,000. 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. Current (no automation) 75,000 units Current (no automation) 75,000 units Proposed (automation) 109,000 units Proposed (automation) 109,000 units Production and sales volume Per Unit Total Per Unit Total Sales revenue $92 $ ? $ 92 $? Variable costs Direct materials $17 $17 Direct labor 20 ? Variable manufacturing overhead 12 12 Total variable manufacturing costs 49 ? Contribution margin $43 ? $47 ? Fixed manufacturing costs $ 1,100,000 $ 2,270,000 Net operating income ? ? Recalculate the NPV using a 9 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 = ? (Tables provided in attached images)
6. Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $12.39 million, and the equipment has a useful life of 10 years with a residual value of $1,090,000. 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. Current (no automation) 75,000 units Current (no automation) 75,000 units Proposed (automation) 109,000 units Proposed (automation) 109,000 units Production and sales volume Per Unit Total Per Unit Total Sales revenue $92 $ ? $ 92 $? Variable costs Direct materials $17 $17 Direct labor 20 ? Variable manufacturing overhead 12 12 Total variable manufacturing costs 49 ? Contribution margin $43 ? $47 ? Fixed manufacturing costs $ 1,100,000 $ 2,270,000 Net operating income ? ? Recalculate the NPV using a 9 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 = ? (Tables provided in attached images)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
6.
Required information
[The following information applies to the questions displayed below.]
Beacon Company is considering automating its production facility. The initial investment in automation would be $12.39 million, and the equipment has a useful life of 10 years with a residual value of $1,090,000. The company will use straight-line
|
|
Current (no automation) 75,000 units |
Current (no automation) 75,000 units |
Proposed (automation) 109,000 units |
Proposed (automation) 109,000 units |
|
Production and sales volume |
Per Unit |
Total |
Per Unit |
Total |
|
Sales revenue |
$92 |
$ ? |
$ 92 |
$? |
|
Variable costs |
|
|
|
|
|
Direct materials |
$17 |
|
$17 |
|
|
Direct labor |
20 |
|
? |
|
|
Variable manufacturing overhead |
12 |
|
12 |
|
|
Total variable |
49 |
|
? |
|
|
Contribution margin |
$43 |
? |
$47 |
? |
|
Fixed manufacturing costs |
|
$ 1,100,000 |
|
$ 2,270,000 |
|
Net operating income |
|
? |
|
? |
Recalculate the NPV using a 9 percent discount rate. (
(Tables provided in attached images)
Transcribed Image Text:TABLE 11.2A Present Value of $1
TABLE 11.1A Future Value of $1
Periods 2%
3%
3.75%
4%
4.25%
5%
6%
7%
8%
Periods
2%
3%
3.75%
4%
4.25%
5%
6%
7%
8%
0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259
1.0000 10000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
0.9612 0.9426 0.9290 0.9246 0.9201 0.9070 0.8900 0.8734 0.8573
1.0200 1.0300 1.0375 1.0400 1.0425 1.0500 1.0600 1.0700 1.0800
2.
1.0404 1.0609 1.0764 1.0816 1.0868 11025
11236 11449
11664
0.9423 0.9151 0.8954 0.8890 0.8826 0.8638 0.8396 0.8163 0.7938
3
1.0612 1.0927 11168
1.1249
11330
11576
11910 1.2250
1.2597
4
0.9238 0.8885 0.8631 0.8548 0.8466 0.8227 0.7921 07629 0.7350
4
1.0824 11255
1.1587
1.1699
11811
1.2155
1.2625 1.3108
1.3605
0.9057 0.8626 0.8319 0.8219 0.8121 0.7835 0.7473 07130 0.6806
1.1041
1.1593
1.2021
1.2167
1.2313
1.2763 1.3382 1.4026 1.4693
6.
0.8880 0.8375 0.8018 07903 0.779O 07462 0.7050 0.6663 0.6302
1.1262
1.1941 1.2472 1.2653 1.2837 1.3401
14185 1.5007 1.5869
7.
0.8706 0.8131
0.7728 07599 0.7473 07107 0.6651 0.6227 0.5835
7
1.1487 1.2299 1.2939 1.3159 13382 1.4071 1.5036 16058
1.7138
8
0.8535 0.7894 07449 07307 07168 0.6768 0.6274 0.5820 0.5403
8.
1.1717
1.2668 1.3425 1.3686 1.3951 14775 1.5938 17182
1.8509
9.
0.8368 07664 07180 0.7026 0.6876 0.6446 0.5919 0.5439 0.5002
9.
1.1951 1.3048 1.3928 1.4233 1.4544 1.5513 1.6895 1.8385 19990
10
0.8203 07441
0.6920 0.6756 0.6595 0.6139 0.5584 O.5083 0.4632
10
1.2190 1.3439 1.4450 1.4802 1.5162
1.6289 1.7906 1.9672 21589
20
0.6730 0.5537 0.4789 0.4564 0.4350 0.3769 0.3118 0.2584 02145
20
1.4859 1.8061 2.0882 21911 22989 2.6533 3.2071 3.8697 4.6610
Periods
9%
10%
11%
12%
13%
14%
15%
20%
25%
Periods
9%
10%
11%
12%
13%
14%
15%
20%
25%
0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8333 0.8000
1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
1.0900 11000
1.1100 11200
11300
11400
1.1500
1.2000
1.2500
0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 07561 0.6944 0.6400
1.1881
1.2100
1.2321 1.2544 12769 1.2996 13225 1.4400 1.5625
0.7722
0.7513 0.7312
0.7118
06931 0.6750 0.6575 0.5787 0.5120
3
1.2950 1.3310
1.3676 1.4049 1.4429 1.4815
1.5209 17280
1.9531
4
0.7084 0,6830 0.6587 0.6355 0.6133 0.5921 0,5718 04823 0.4096
4.
1.4116
1.4641
1.5181 1.5735 16305 1.6890 17490 2.0736 2.4414
0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4019 0.3277
1.5386 1.6105
1.6851 17623 1.8424 1.9254 2.0114 2.4883 3.0518
6.
0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.3349 0.2621
6.
16771
1.7716
1.8704 1.9738 2.0820 2.1950
2.3131 2.9860 3.8147
0.5470 0.5132 0.4817 04523 04251 0.3996 0.3759 0.2791 0.2097
7.
1.8280 1.9487 2.0762 2.2107 2.3526 2.5023 2.6600 3.5832 4.7684
8.
0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.2326 0.1678
8.
1.9926
2.1436 2.3045 2.4760 2.6584 2.8526 3.0590 4.2998 5.9605
0.4604 0.4241
0.3909 0.3606 0.3329 0.3075 0.2843 0.1938 01342
9
2.1719
2.3579 2.5580 2.7731 3.0040 3.2519
3.5179 51598
74506
10
04224 0.3855 0.3522 03220 0.2946 0.2697 0.2472 01615
0.1074
10
2.3674 2.5937 28394 3.1058 3.3946 3.7072 4.0456
6.1917
9.3132
20
0.1784 01486
0.1240 0.1037
0.0868 0.0728 0.0611
0.0261 0.0115
20
5.6044 6.7275 8.0623 9.6463 11.5231 13.7435 16.3665 38.3376 86.7362
Transcribed Image Text:TABLE 11.3A Future Value of an Annuity of $1
TABLE 11.4A Present Value of Annuity of $1
Periods 2%
3% 3.75%
4%
4.25%
5%
6%
7%
8%
Periods" e
2%
3%
3.75%
4%
4.25%
5%
6%
7%
8%
1.0000 1.0000 1.0000 1.0000 1.0000 1.0000
1.0000
1.0000
1.0000
1
0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259
2
2.0200 2.0300 2.0375 2.0400 2.0425 2.0500
2.0600
2.0700
2.0800
1.9416
1.9135
1.8929
1.8861
1.8794 1.8594
1.8334
1.8080
1.7833
3
3.0604 3.0909 3.1139
3.1216
3.1293
3.1525
3.1836
3.2149
3.2464
2.8839 2.8286
2.7883
2.7751
2.7620 2.7232 2.6730 2.6243 2.5771
4
4.1216
4.1836
4.2307
4.2465
4.2623
4.3101
4.3746
4.4399
4.5061
3.8077
3.7171
3.6514
3.6299 3.6086 3.5460 3.4651 3.3872
3.3121
5.2040
5.3091
5.3893
5.4163
5.4434
5.5256
5.6371
5.7507
5.8666
4.7135 4.5797 4.4833
4.4518
4.4207 4.3295 42124
4.1002 3.9927
6.
6.3061
6.4684
6.5914
6.6330
6.6748
6.8019
6.9753
71533
7.3359
6.
5.6014
5.4172
5.2851 5.2421
5.1997
5.0757 4.9173 4.7665 4.6229
7.4343
76625
7.8386
7.8983
7.9585
8.1420
8.3938
8.6540
8.9228
7.
6.4720 6.2303
6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5.2064
8.
8.5830
8.8923
9.1326
9.2142
9.2967
9.5491
9.8975
10.2598
10.6366
8
7.3255
7.0197
6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466
9
9.7546
10.1591
10.4750 10.5828 10.6918 11.0266
11.4913
11.9780
12.4876
9
8.1622
77861
7.5208 74353
7.3513
71078 6.8017 6.5152 6.2469
10
10.9497 11.4639 11.8678 12.0061
12.1462 12.5779
13.1808
13 8164
14.4866
10
8.9826 8.5302 8.2128
8.1109
8.0109
77217 7.3601 7.0236 6.7101
20
24.2974 26.8704 29.0174 29.7781 30.5625 33.0660 36.7856
40.9955 45.7620
20
16.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181
Periods
9%
10%
11%
12%
13%
14%
15%
20%
25%
Periods" e
9%
10%
11%
12%
13%
14%
15%
20%
25%
1
1.0000 1.0000
1.0000
1.0000 1.0000 1.0000
1.0000
1.0000
1.0000
0.9174
0.9091 0.9009 0.8929 0.8550 0.8772 0.8696 0.8333 0.8000
2.0900 2.1000
2.1100
2.1200
21300
21400
2.1500
2.2000
2.2500
1.7591
1.7355
1.7125
1.6901
1.6681
1.6467
1.6257 1.5278 14400
3.2781
3.3100
3.3421
3.3744
3.4069
3.4396
3.4725
3.6400
3.8125
4
4.5731
4.6410
4.7097
4.7793
4.8498
4.9211
4.9934
5.3680
5.7656
2.5313
2.4869 24437 24018
2.3612 2.3216 2.2832
2.1065
1.9520
5.9847
6.1051
6.2278
6.3528
6.4803
6.6101
6.7424
7.4416
8.2070
3.2397
3.1699
3.1024
3.0373 2.9745
2.9137 2.8550 2. 5887 2.3616
7.5233
77156
7.9129
8.1152
8.3227 8.5355
8.7537
9.9299
11.2588
5.
3.8897 37908
3.6959 3.6048 3.5172 3.4331 3.3522 2.9906 2.6893
7
9.2004 9.4872
9.7833
10.0890 10.4047 10.7305
11.0668
12.9159
15.0735
4.4859 4.3553
4.2305
4.1114
3.9975 3.8887 3.7845 3.3255 2.9514
8.
11.0285
11.4359 11.8594 12.2997 12.7573 13.2328 13.7266
16.4991
19.8419
5.0330 4.8684
4.7122 4.5638 4.4226 4 2883 4.1604 3.6046
3.1611
9
13.0210 13.5975
14.1640
14.7757 15.4157 16.0853 16.7856
20.7989 25.8023
8.
5.5348 5.3349
51461
4.9676 4.7988
4.6389 4.4873 3.8372 3.3289
10
15.1929 15.9374 16.7220 17.5487 18.4197 19.3373 20.3037 25.9587 33.2529
9
5.9952 5.7590 5.5370 5.3282
5.1317
4.9464
4.7716
4.0310
3.4631
20
51.1601 57.2750 64.2028 72.0524 80.9468 91.0249 102.4436 186.6880 342.9447
10
6.4177
6.1446
5.8892 5.6502
5.4262
5.2161 5.0188
4.1925 3.5705
20
9.1285
8.5136
7.9633
7.4694
7.0248
6.6231 6.2593 4.8696 3.9539
"There is one paymant each period.
"There is one payment each period.
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