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.)
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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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