B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $380,800 and has a 8-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 Years 1 through 8 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.) Net present value Annual Net Cash Flows X < Required A Present Value of Annuity at 10% $ 238,000 83,000 47,600 23,800 $ 83,600 = Present Value of Net Cash Flows $ Required B > 0

B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $380,800 and has a 8-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 Years 1 through 8 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.) Net present value Annual Net Cash Flows X < Required A Present Value of Annuity at 10% $ 238,000 83,000 47,600 23,800 $ 83,600 = Present Value of Net Cash Flows $ Required B > 0

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 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 $360,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 144,000 units of the equipment’s product each year. The expected annual income related to this equipment follows. Compute the (1) payback period and (2) accounting rate of return for this equipment.
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