B2B Co. is considering the purchase of equipment that would allow the company to
ID: 2521278 • Letter: B
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 5368,000 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis.The company expects to sell 147,200 units of the equipment's product each year. The expected annual income related to this equipment follows. If at least an 8% return on this investment must be earned, compute the net present value. (PV of $1, FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales Costs 5 230,000 Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses 81,000 46,000 23.000 Total costs and expenses 150,000 Pretax income Income taxes (20%) 80,000 16,000 Net income 5 64.000 Compute the net present value of this investment. hart Values are Based on: 996 elect Chart Amount x PV Factor |= | Present Value resent Value of an Annuity of 1 110,000:x Present value of cash inflows Present value of cash outflows Net present value (368,000)Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Chart values are based on n= 8.00 I = 9% Amount X PV Factor = Present Value Present Value of an Annuity of 1 110,000.00 5.5348 608,830.10 Present Value of cash inflows 608,830.10 Present Value of cash outflows (368,000.00) Net present value 240,830.10 Time PVF at 9% 1.00 0.9174 2.00 0.8417 3.00 0.7722 4.00 0.7084 5.00 0.6499 6.00 0.5963 7.00 0.5470 8.00 0.5019 PVF for 8 years at 9% 5.5348
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