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B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $368,000 and has a 10-year life and no salvage value. B2B Company requires at least an 10% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income $ 230,000 81,000 36,800 23,000 $ 89,200 (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value?

B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $368,000 and has a 10-year life and no salvage value. B2B Company requires at least an 10% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income $ 230,000 81,000 36,800 23,000 $ 89,200 (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $368,000 and has a 10-year life and no salvage value. B2B Company requires at least an 10% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals and other final answers to the nearest whole dollar.) Years 1 through 10 Net present value Annual Net Cash Flows X $ 230,000 81,000 36,800 23,000 $ 89, 200 < Required A Present Value of Annuity at 10% Present Value of Net Cash Flows Required B >
Transcribed Image Text:B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $368,000 and has a 10-year life and no salvage value. B2B Company requires at least an 10% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B Compute the net present value of this investment. (Round your present value factor to 4 decimals and other final answers to the nearest whole dollar.) Years 1 through 10 Net present value Annual Net Cash Flows X $ 230,000 81,000 36,800 23,000 $ 89, 200 < Required A Present Value of Annuity at 10% Present Value of Net Cash Flows Required B >
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