Question
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
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 $376,000 with a 6-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 150,400 units of the equipments product each year. The expected annual income related to this equipment follows: Sales: $ 235,000 Costs Materials, labor, and overhead (except depreciation on new equipment): 82,000 Depreciation on new equipment: 62,667 Selling and administrative expenses: 23,500 Total costs and expenses: 168,167 Pretax income: 66,833 Income taxes (40%: 26,733 Net income $ 40,100
If at least a 10% 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.)
n = 6, i = ? Present value of annuity 1 = amt (?) x PV factor (?) PV of Cash Inflows = ? PV of Cash Outflows = ? NPV = ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started