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 $491,000 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 $ 1,990,000 1,477,000 120, 250 145,000 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%.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Compute this machine's payback period, assuming that cash flows occur evenly throughout each year.
Payback Period
Denominator:
Numerator:
Show Transcribed Text
Years 1-4
Salvage value, year 4
Total
1
/
Net present value
3
Net Cash
Flows
Compute net present value for this machine using a discount rate of 6%. (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.)
X
Ĵ
=
Present Value
at 6%
=
=
=
=
Payback Period
0
=
Present Value of
Net Cash Flows
$
0
0
Transcribed Image Text:Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Denominator: Numerator: Show Transcribed Text Years 1-4 Salvage value, year 4 Total 1 / Net present value 3 Net Cash Flows Compute net present value for this machine using a discount rate of 6%. (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.) X Ĵ = Present Value at 6% = = = = Payback Period 0 = Present Value of Net Cash Flows $ 0 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 $491,000 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 6%.
Complete this question by entering your answers in the tabs below.
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
$
$
Income
1,990,000
1,477,000
120,250
145,000
247,750
$ 1,990,000
1,477,000
120, 250
145,000
$
Cash Flow
0
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 $491,000 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 6%. Complete this question by entering your answers in the tabs below. 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 $ $ Income 1,990,000 1,477,000 120,250 145,000 247,750 $ 1,990,000 1,477,000 120, 250 145,000 $ Cash Flow 0
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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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