Factor Company is planning to add a new product to its line. Tomanufacture this product, the company needs to buy a new machine ata $507,000 cost with an expected four-year life and a $19,000salvage value. All sales are for cash, and all costs areout-of-pocket, except for depreciation on the new machine.Additional information includes the following. (PV of $1, FV of $1,PVA of $1, and FVA of $1) (Use appropriate factor(s) fromthe tables provided.)

Expected annual sales of new product	$	1,980,000
Expected annual costs of new product
Direct materials		495,000
Direct labor		673,000
Overhead (excluding straight-line depreciation on newmachine)		336,000
Selling and administrative expenses		173,000
Income taxes		34	%

Required:
1. Compute straight-line depreciation for eachyear of this new machine’s life.
2. Determine expected net income and net cash flowfor each year of this machine’s life.
3. Compute this machine’s payback period, assumingthat cash flows occur evenly throughout each year.
4. Compute this machine’s accounting rate ofreturn, assuming that income is earned evenly throughout eachyear.
5. Compute the net present value for this machineusing a discount rate of 6% and assuming that cash flows occur ateach year-end. (Hint: Salvage value is a cash inflow atthe end of the asset’s life.)