ayed below. Beacon Company is considering automating its production facility. The initial investment in automation would be $6.20 million, and the equipment has a useful life of 5 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 31,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volune Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 88,000 units Net present value Per Unit $93 $16 25 11 52 $ 41 Total 1,090,000 ? Proposed (automation) 119,000 units Per Unit $93 $16 7 11 2 $.46 Total $7 2,280,000 7 Required: 5. 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) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.

ayed below. Beacon Company is considering automating its production facility. The initial investment in automation would be $6.20 million, and the equipment has a useful life of 5 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 31,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volune Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 88,000 units Net present value Per Unit $93 $16 25 11 52 $ 41 Total 1,090,000 ? Proposed (automation) 119,000 units Per Unit $93 $16 7 11 2 $.46 Total $7 2,280,000 7 Required: 5. 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) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.

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 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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