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 $374,400 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 149,760 units of the equipments product each year. The expected annual income related to this equipment follows. Sales $ 234,000 Costs Materials, labor, and overhead (except depreciation on new equipment) 82,000 Depreciation on new equipment 46,800 Selling and administrative expenses 23,400 Total costs and expenses 152,200 Pretax income 81,800 Income taxes (20%) 16,360 Net income $ 65,440 If at least an 9% 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.)
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