Problem 26-1A (Static) Payback period, net present value, and net cash flow calculation LO P1, P3 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 $480,000 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) Note: 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%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 31 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 1,840,000 1,488,000 115,000 183,100 53,900 $ 1,840,000 1,488,000 115,000 183, 100. 16 Cash Flow
Problem 26-1A (Static) Payback period, net present value, and net cash flow calculation LO P1, P3 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 $480,000 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) Note: 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%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 31 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 1,840,000 1,488,000 115,000 183,100 53,900 $ 1,840,000 1,488,000 115,000 183, 100. 16 Cash Flow
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject : Accounting
Transcribed Image Text:Required 1 Required 2 Required 3
Compute this machine's payback period, assuming that cash flows occur evenly throughout each year.
Payback Period
Denominator:
Numerator:
Show Transcribed Text
Required 1 Required 2
Years 1-4
Salvage value, year 4
Total
Required 3
Compute net present value for this machine using a discount rate of 7%.
Note: 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.
Net present value
Net Cash
Flows
Present Value
at 7%
=
Payback Period
=
Present Value of
Net Cash Flows
Transcribed Image Text:Problem 26-1A (Static) Payback period, net present value, and net cash flow calculation LO P1, P3
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 $480,000 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)
Note: 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%.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 31
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
1,840,000
1,488,000
115,000
183,100
53,900
$ 1,840,000
1,488,000
115,000
183, 100
16
Cash Flow
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