B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $379,200 and has a 6-year life and no salvage value. B2B Company requires at least an 9% 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) Note: 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. $ 237,000 83,000 63,200 23,700 $ 67,100 (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. Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar. Annual Net Cash Flows X Present Value of Annuity at 9% Present Value of Net Cash Years 1 through 6 Flows = $ Net present value

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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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 $379,200 and has a 6-year life and no salvage value. B2B Company requires at least an
9% 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)
Note: 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.
$ 237,000
83,000
63,200
23,700
$ 67,100
(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.
Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar.
Annual Net Cash
Flows
X
Present
Value of
Annuity at
9%
Present Value
of Net Cash
Years 1 through 6
Flows
=
$
Net present value
<Required A
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 $379,200 and has a 6-year life and no salvage value. B2B Company requires at least an 9% 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) Note: 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. $ 237,000 83,000 63,200 23,700 $ 67,100 (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. Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar. Annual Net Cash Flows X Present Value of Annuity at 9% Present Value of Net Cash Years 1 through 6 Flows = $ Net present value <Required A Required B >
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