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13 5 points eBook Print References 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 $515,000 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 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 8%. 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 < Required 1 Income $ 1,880,000 $ $ 1,499,000 123,750 171,000 86,250 $ 1,880,000 1,499,000 123,750 171,000 Cash Flow $ Required 2 > 1,880,000 1,499,000 303,188 171,000 Check my work (93,188)

Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. Payback Period Denominator: Numerator: Initial investment $ Annual net cash flow 515,000/ $ 210,000 = < Required 1 Payback Period 2.45 years Required 3 >

Compute net present value for this machine using a discount rate of 8%. (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 near whole dollar.) Years 1-4 Salvage value, year 4 Total Initial investment Net present value Net Cash Flows $ 20,000 x < Required 2 Present Value at 8% 0.7350 = 0.7350 = = Present Value of Net Cash Flows $ Required 3 > 0 14,700