Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $408,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows.
| Sales of new product | $ 255,000 |
|---|---|
| Expenses | |
| Materials, labor, and overhead (except |
136,000 |
| Depreciation—Equipment | 34,000 |
| Selling, general, and administrative expenses | 25,500 |
| Income | $ 59,500 |
(a) Compute the annual net cash flow.
(b) Compute the payback period.
(c) Compute the accounting
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B Required C
Compute the annual net cash flow.
Annual Results from Investment
Sales of new product
Expenses
Materials, labor, and overhead (except depreciation)
Depreciation Equipment
Selling, general, and administrative expenses
Income
Net cash flow
Required A
S
$
Income
255,000
136,000
34,000
25,500
59,500
$
Cash Flow
Required B >
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required A Required B
Compute the payback period.
Numerator:
1
1
Required C
Payback Period
Denominator:
< Required A
=
Payback period
0
Required C >
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