Question
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $372,800 and has a 4-year life and no salvage value. B2B Company requires at least an 10% 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)
Note: Use appropriate factor(s) from the tables provided.
Sales of new product | $ 233,000 |
---|---|
Expenses | |
Materials, labor, and overhead (except depreciation) | 82,000 |
DepreciationEquipment | 93,200 |
Selling, general, and administrative expenses | 23,300 |
Income | $ 34,500 |
(a) Compute the net present value of this investment.
(b) Should the investment be accepted or rejected on the basis of net present value?
Compute the net present value of this investment. Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollarStep by Step Solution
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