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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 $515,000 cost with an expected four-year life and a $20,000 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 $ 1,890,000 1,472,000 123,750 179,000 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 6%.

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 $515,000 cost with an expected four-year life and a $20,000 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 $ 1,890,000 1,472,000 123,750 179,000 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 6%.

Essentials Of Investments
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
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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 $515,000 cost with an expected four-year life and a $20,000 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 Ś 1,890,000 1,472,000 123,750 179,000 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 6%.
Transcribed Image Text: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 $515,000 cost with an expected four-year life and a $20,000 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 Ś 1,890,000 1,472,000 123,750 179,000 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 6%.
Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's life. Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Net cash flow Required 1 Required 2 Required 3 Numerator: Years 1-4 Salvage value, year 4 Total 1 1 Net present value < Required 1 Required 3 < Required 1 Net Cash Flows $ Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Denominator: X $ < Required 2 Income 1,890,000 = 1,472,000 123,750 179,000 115,250 Required 1 Required 2 Compute net present value for this machine using a discount rate of 6%. (Do not round intermediat amounts should be entered with a minus sign. Round your present value factor to 4 decimals and fir nearest whole dollar.) $ Required 2 > Cash Flow Present Value at 6% Payback Period 0 Required 3 > = 0 Required 3 Present Value of Net Cash Flows $ 0 0
Transcribed Image Text:Required 1 Required 2 Required 3 Determine income and net cash flow for each year of this machine's life. Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Net cash flow Required 1 Required 2 Required 3 Numerator: Years 1-4 Salvage value, year 4 Total 1 1 Net present value < Required 1 Required 3 < Required 1 Net Cash Flows $ Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Denominator: X $ < Required 2 Income 1,890,000 = 1,472,000 123,750 179,000 115,250 Required 1 Required 2 Compute net present value for this machine using a discount rate of 6%. (Do not round intermediat amounts should be entered with a minus sign. Round your present value factor to 4 decimals and fir nearest whole dollar.) $ Required 2 > Cash Flow Present Value at 6% Payback Period 0 Required 3 > = 0 Required 3 Present Value of Net Cash Flows $ 0 0
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