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Exercise 24-13 (Algo) Net present value of an annuity LO P3 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800 and has a 6-year life and no salvage value. B2B Company requires at least an 8% 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 Complete this question by entering your answers in the tabs below. (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Required A Required B Years 1 through 6 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.) Initial investment Net present value Annual Net Cash Flows $ X 127,700 x Present Value of Annuity at 8% 3.2397 = $ 233,000 82,000 62,133 23,300 $ 65,567 $ Present Value of Net Cash Flows $ 413,710 (372,800) 40,910

Exercise 24-13 (Algo) Net present value of an annuity LO P3 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800 and has a 6-year life and no salvage value. B2B Company requires at least an 8% 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 Complete this question by entering your answers in the tabs below. (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Required A Required B Years 1 through 6 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.) Initial investment Net present value Annual Net Cash Flows $ X 127,700 x Present Value of Annuity at 8% 3.2397 = $ 233,000 82,000 62,133 23,300 $ 65,567 $ Present Value of Net Cash Flows $ 413,710 (372,800) 40,910

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 19E
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Exercise 24-13 (Algo) Net present value of an annuity LO P3 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800 and has a 6-year life and no salvage value. B2B Company requires at least an 8% 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 Complete this question by entering your answers in the tabs below. (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Required A Required B Years 1 through 6 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.) Initial investment Net present value Annual Net Cash Flows $ X 127,700 x Present Value of Annuity at 8% 3.2397 $ 233,000 82,000 62,133 23,300 $ 65,567 $ Present Value of Net Cash Flows $ 413,710 (372,800) 40,910
Transcribed Image Text:Exercise 24-13 (Algo) Net present value of an annuity LO P3 B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800 and has a 6-year life and no salvage value. B2B Company requires at least an 8% 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 Complete this question by entering your answers in the tabs below. (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Required A Required B Years 1 through 6 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.) Initial investment Net present value Annual Net Cash Flows $ X 127,700 x Present Value of Annuity at 8% 3.2397 $ 233,000 82,000 62,133 23,300 $ 65,567 $ Present Value of Net Cash Flows $ 413,710 (372,800) 40,910
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