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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 $491,000 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 $ 1,940,000 Expenses   Materials, labor, and overhead (except depreciation) 1,507,000 Depreciation—Machinery 117,750 Selling, general, and administrative expenses 149,000   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 7%

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 $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 $ 1,940,000 Expenses   Materials, labor, and overhead (except depreciation) 1,507,000 Depreciation—Machinery 117,750 Selling, general, and administrative expenses 149,000   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 7%

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter8: Investing Activities
Section: Chapter Questions
Problem 1.3AIC: Estimate the average total estimated useful life of depreciable property, plant, and equipment....
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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 $491,000 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 $ 1,940,000
Expenses  
Materials, labor, and overhead (except depreciation) 1,507,000
Depreciation—Machinery 117,750
Selling, general, and administrative expenses 149,000

 
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 7%

Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Net cash flow SA Income 1,940,000 $ 1,507,000 117,750 149,000 166,250 $ Cash Flow 1,940,000 1,507,000 117,750 149,000 166,250
Transcribed Image Text:Annual amounts Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation Machinery Selling, general, and administrative expenses Income Net cash flow SA Income 1,940,000 $ 1,507,000 117,750 149,000 166,250 $ Cash Flow 1,940,000 1,507,000 117,750 149,000 166,250
Numerator: I 1 Payback Period Denominator: = = Payback Period 0
Transcribed Image Text:Numerator: I 1 Payback Period Denominator: = = Payback Period 0
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