[The following information applies to the questions displayed below.) Beacon Company is considering automating its...
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[The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $11.02 million, and the equipment has a useful life of 9 years with a residual value of $1,030,000. The company will use straight- line depreciation. Beacon could expect a production increase of 41,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 88,000 units Per Unit Total $ 98 Proposed (automation) 129,000 units Per Unit Total $ 98 $ ? $? $ 20 20 $ 20 ? 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 49 $ 49 S53 $ 1,130,000 $ 2,160,000 4. Using a discount rate of 15 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.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Net present value $ (1,702,847)
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