### Equipment Investment Analysis for B2B Co.B2B Co. is evaluating the purchase of new equipment to expand its product line. The equipment has an anticipated cost of $240,000, a useful life of 12 years, and no salvage value. It will be depreciated using the straight-line method. The company forecasts the sale of 96,000 units annually from this equipment. Below is the expected annual income associated with this equipment:#### Financial Overview:- **Sales:** $150,000- **Costs:** - Materials, labor, and overhead (excluding depreciation on new equipment): $80,000 - Depreciation on new equipment: $20,000 - Selling and administrative expenses: $15,000- **Total Costs and Expenses:** $115,000- **Pretax Income:** $35,000- **Income Taxes (30%):** $10,500- **Net Income:** $24,500---#### Payback Period Calculation:The task is to compute the payback period using the provided chart.#### Chart Explanation:A chart is provided to compute the payback period. The formula involves dividing a chosen numerator (likely the initial investment) by a chosen denominator (annual net cash flow). This will give the payback period, represented in years. - **Choose Numerator:** (Identified as the total investment cost, $240,000)- **Choose Denominator:** (Annual net income or cash flow, $24,500)Once these values are placed appropriately, the payback period will be calculated by dividing the total investment cost by the annual net income.This framework aids B2B Co. in determining how long it will take to recoup the initial investment from the net income generated by the new equipment.

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B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 150,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses 80,000 20,000 15,000 Total costs and expenses 115,000 Pretax income 35,000 10,500 Income taxes (30%) Net income $24,500 1. Compute the payback period. Payback Period Choose Denominator: Payback Period Choose Numerator: %3D Payback period

B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected to cost $240,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 96,000 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 150,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses 80,000 20,000 15,000 Total costs and expenses 115,000 Pretax income 35,000 10,500 Income taxes (30%) Net income $24,500 1. Compute the payback period. Payback Period Choose Denominator: Payback Period Choose Numerator: %3D Payback period

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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