help with my accounting homework, please?

hello, could you please help me with my homework.

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 $492,000 cost with an expected five-year life and a $18,900 salvage value. All sales are for cash, and all costs are out of pocket except for depreciation on the new machine. Additional information includes the following.

Expected annual sales of new product

$1,890,000

Expected annual costs of new product

Direct materials

480,000

Direct labor

676,000

Overhead excluding straight-line depreciation on new machine

335,000

Selling and administrative expenses

165,000

Income taxes

38%

then I’m asked to calculate the net income, net cash flow, payback period, accounting rate of return and net present value.

please help me, i really need your help/
thanks a lot.

Salvage Car Sale Buddies

One Response to “help with my accounting homework, please?”

lady23:

May 25, 2010 at 4:52 pm

first calculate the additional dep’n for the new machine (492000-18900)/5=94620

sales 1890000
less: COS
direct materials (480000)
direct labor (676000)
overhead (335000)
gross profit 399000
less: opex
selling and admin (165000)
depreciation exp (94620)
operating income 139380
less: income tax
(139380*38%) (52964)
net income 86416

net cash inflow:
net income 86416
add: dep’n 94620
total 181036

payback period is computed as cost of investment divided by annual cash inflow

492000/181036=2.72 years

accounting rate of return is computed as net income/[(original investment+salvage value)/2]

86416/ [(492000+18900)/2]=.6766

i cant compute the net present value cos u have no interest indicated in the problem

i hope this helps