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B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $360,000 and has a 12-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 (a) Compute the net present value of this investment. $225,000 120,000 30,000 38,250 $ 36,750 (b) Should the investment be accepted or rejected on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required B 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.) Years 1 through 12 Net present value Annual Net Cash Flows Present Value of Annuity at 8% Present Value of Net Cash Flows Required A Required B > Required A Required B Should the investment be accepted or rejected on the basis of net present value? Should the investment be accepted or rejected on the basis of net present value? < Required A Required B
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