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Saved Problem 24-1A Computation of payback period, accounting rate of return, and net present value LO P1, P2, P3 Factor Comp
appropriate factor(s) from the tables provided. Round PV factor value to 4 decimal places.) Expected annual sales of new prod
em(s) Complete this question by entering your answers in the tabs below. Required 2 Required 4 Required 3 Required 5 Required
Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (excluding s
$2,040, Expected annual sales of new product Expected annual costs of new product Direct materials Direct labor Overhead (exc
1 Required: 1. Compute straight-line depreciation for each year of this new machines life. 2. Determine expected net income
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Answer #1

Requirement 1:

Initial Investment = $560,000
Salvage Value = $28,000
Useful Life = 4 years

Annual Depreciation = (Initial Investment - Salvage Value) / Useful Life
Annual Depreciation = ($560,000 - $28,000) / 4
Annual Depreciation = $133,000

Answer 2.

$ 2,040,000 Expected Net Income Revenues Sales Expenses Direct materials Direct labor Overhead excluding depreciation Selling

Answer 3.

Payback Period = Cost of Investment / Annual Net Cash Flow
Payback Period = $560,000 / $241,500
Payback Period = 2.32 years

Answer 4.

Annual Average Investment = (Initial Investment + Salvage Value) / 2
Annual Average Investment = ($560,000 + $28,000) / 2
Annual Average Investment = $294,000

Accounting Rate of Return = Annual Net Income / Annual Average Investment
Accounting Rate of Return = $108,500 / $294,000
Accounting Rate of Return = 36.90%

Answer 5.

Cash Flow Annual cash flow Residual value Chart Values are Based on: n = 3.00% Select Chart Amount PVA of $1 $ 241,500.00 PV

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