Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume 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) 81,000 Proposed (automation) 128,000 units units Net present value Per Unit $94 $17 30 9 56 $38 Total $? 1,240,000 ? 4 Per Unit $94 $17 ? 9 > $44 Total $? ? 2,200,000 ? Required: 4. Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (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.
Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume 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) 81,000 Proposed (automation) 128,000 units units Net present value Per Unit $94 $17 30 9 56 $38 Total $? 1,240,000 ? 4 Per Unit $94 $17 ? 9 > $44 Total $? ? 2,200,000 ? Required: 4. Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (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.
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
Problem 1PS
Related questions
Question
![Required information
[The following information applies to the questions displayed below.]
Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52
million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
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) 81,000 Proposed (automation) 128,000
units
units
Net present value
Per Unit
$94
$17
30
9
56
$38
Total
$ ?
?
1,240,000
?
Per Unit
$94
$17
P
9
?
$44
Total
$ ?
?
2,200,000
Required:
4. Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F45d15712-588d-4613-826b-e65c82ad57f3%2Fa8359afc-099c-48f5-946f-8ba2e2594e2d%2Fdpak96n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52
million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
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) 81,000 Proposed (automation) 128,000
units
units
Net present value
Per Unit
$94
$17
30
9
56
$38
Total
$ ?
?
1,240,000
?
Per Unit
$94
$17
P
9
?
$44
Total
$ ?
?
2,200,000
Required:
4. Using a discount rate of 14 percent, calculate the net present value (NPV) of the proposed investment. (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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 4 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education