So, here is a homework question:

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 $382,400 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,960 units of the equipment's product each year. The expected annual income related to this equipment follows.

Sales $239,000

Costs

Materials, labor, and overhead (except depreciation on new equipment) 84,000

Depreciation on new equipment 47,800

Selling and administrative expenses 23,900

Total costs and expenses 155,700

Pretax income 83,300

Income taxes (30%) 24,990

Net income $58,310

If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1,FV of $1,PVA of $1andFVA of $1)(Use appropriate factor(s) from the tables provided.)

I'm not looking for the solution to the problem - that's cheating.

What I am confused by is one of the key steps in solving the problem... Determining the Present Value of an Annuity of 1 based on the information above.

Can anyone walk me through this like Barney explaining it to a little child?

Thank you.