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Exercise 24-9 Computing net present value LO P3 B2B Co. is considering the purchase of equipment that would allow the company to add a new
Exercise 24-9 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 $377,600 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 151,040 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales Costs $ 236,000 Materials, labor, and overhead (except depreciation on new equipment) 83,000 37,760 23,600 144,360 91,640 27,492 $ 64,148 Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (30%) Net income If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1. EV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) art Values are Based on: Select Chart Amount x PV Factor l = Present Value resent Value of an Annuity of 1 Present value of cash inflows Present value of cash outflows Net present value
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