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Exercise 25-9 Computing net present value LO P3 B2B Co. is considering the purchase of equipment that would allow the company to add a new
Exercise 25-9 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 $360,000 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 144,000 units of the equipment's product each year. The expected annual income related to this equipment follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) $ 225,000 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 (30%) Net income 120,000 30,000 22,500 172,500 52,500 15,750 36,750 $ If at least an 8% return on this investment must be earned, compute the net present value of this investment. Chart Values are Based on: Select Chart Amount * PV Factor - Present Value Net present value
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