Elite company is planning to add a new product to its line. To manufacturer this product, the company needs to buy a new machine at a $300,000 cost with an expected 4 year life and a $20,000 salvage value. All sales are for cash, and all cost are out of pocket except for the depreciation on the new machine. Additional information includes the following:-cost of new machine $300,000-life of new machine in years 4-salvage value if new machine $20,000-expected annual sales of new product $1,150,000Expected annual cost of new product :-direct materials $300,000-direct labor $420,000-overhead excluding SL depreciation on new machine $210,000-selling and administrative expenses $100,000-income taxes 30%-discount rate for net present value of investment 7%1. Compute the straight line depreciation for each year of this new machine
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Factor Company is planning to add a new product to its line. Tomanufacture this product, the company needs to buy a new machine ata $491,000 cost with an expected four-year life and a $15,000salvage value. All sales are for cash, and all costs areout-of-pocket, except for depreciation on the new machine.Additional information includes the following. (FV of $1, PV of $1,FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tablesprovided.) Expected annual sales of new product $ 1,960,000Expected annual costs of new product Direct materials 490,000Direct labor 676,000 Overhead (excluding straight-line depreciationon new machine) 335,000 Selling and administrative expenses 141,000Income taxes 40 % Required:
Compute the net present value for this machine using a discountrate of 6% and assuming that cash flows occur at each year-end.(Hint: Salvage value is a cash inflow at the end of theassetâs life.) (Do not round intermediatecalculations.) |
