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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject:
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 $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
$ 1,990,000
1,468,000
125, 250
171,000
Present
Value at
7%
0.7629 -
✓=
N
Present Value
of Net Cash
Flows
267,778
0
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education