Question

7.

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 $382,400 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,960 units of the equipment’s product each year. The expected annual income related to this equipment follows.

Sales	$	239,000
Costs
Materials, labor, and overhead (except depreciation on new equipment)		84,000
Depreciation on new equipment		38,240
Selling and administrative expenses		23,900
Total costs and expenses		146,140
Pretax income		92,860
Income taxes (30%)		27,858
Net income	$	65,002

If at least an 8% 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.)

Chart Values are Based on:
n =
i =		%
Select Chart	Amount	x	PV Factor	=	Present Value
				=
Net present value

Answer 1

B2B Co. is considering the purchase of equipment that would allow the company to add a new product to its line

answered by: anonymous