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Exercise 11-9 Computing net present value LO P3 B2B Co. is considering the purchase of equipment that would allow the company to add a new
Exercise 11-9 Computing net present value LO P3 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 $371,200 with a 4-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 148,480 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 232,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (304) Net income 81,000 92,800 23,200 197,000 35,000 10,500 $ 24,500 If at least an 10% return on this investment must be earned, compute the net present value of this investment (PV of $1. FV of $1. PVA of S1, and EVA of S1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: Select Chart Amount x PV Factor - Present Value Net present value
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