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B28 Co. is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment is expected
B28 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 $377,600 with a 6-year life and no salvage value. It will be depreciated on a straight-line basis. B2B Co. concludes that it must earn at least a 9% return on this investment. The company expects to sell 151,040 units of the equipment's product each year. The expected annual income related to 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 Costs $236,000 83,000 62,933 23,600 Materials, labor, and overhead (except depreciation) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income 169,533 66,467 26,587 Income taxes (40%) Net income $ 39,880
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