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 $380,800 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,320 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 238,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 83,000 38,080 23,800 144,880 93,120 37,248 Pretax income Income taxes (40%) Net income $ 55,872 If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $380,800 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company
expects to sell 152,320 units of the equipment's product each year. The expected annual income related to this equipment follows.
Sales
$ 238,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)
Depreciation on new equipment
Selling and administrative expenses
Total costs and expenses
83,000
38,080
23,800
144,880
93,120
37,248
Pretax income
Income taxes (40%)
Net income
$ 55,872
If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of
$1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
Chart Values are Based on:
n =
10
i =
9|%
Select Chart
Amount
PV Factor
Present Value
Present Value of an Annuity of 1
93,952 x
$
Present value of cash inflows
Present value of cash outflows
Net present value
Transcribed Image Text: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 $380,800 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,320 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $ 238,000 Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses 83,000 38,080 23,800 144,880 93,120 37,248 Pretax income Income taxes (40%) Net income $ 55,872 If at least an 9% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: n = 10 i = 9|% Select Chart Amount PV Factor Present Value Present Value of an Annuity of 1 93,952 x $ Present value of cash inflows Present value of cash outflows Net present value
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