B2B Co. is considering the purchase of equipment that would allow the company to add a...

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Finance

B2B Co. is considering the purchase of equipment that wouldallow the company to add a new product to its line. The equipmentis expected to cost $379,200 with a 10-year life and no salvagevalue. It will be depreciated on a straight-line basis. The companyexpects to sell 151,680 units of the equipment’s product each year.The expected annual income related to this equipment follows.
Sales $ 237,000
Costs
Materials,labor, and overhead (except depreciation on new equipment) 83,000
Depreciation onnew equipment 37,920
Selling andadministrative expenses 23,700
Total costs andexpenses 144,620
Pretaxincome 92,380
Income taxes(40%) 36,952
Net income $ 55,428
If at least an 9% return on this investment must be earned,compute the net present value of this investment. (PV of $1, FV of$1, PVA of $1, and FVA of $1) (Use appropriate factor(s)from the tables provided.)
Chart Values are Basedon:
n =
i =
Select Chart Amount x PV Factor = Present Value
= $0
Netpresent value

Answer & Explanation Solved by verified expert

4.1 Ratings (816 Votes)

Chart values are based on
n = 10 Years
I = 9%
Select Chart	Amount	PV Factor =	Present Value
Initial Investment	(379,200.00)	1.00	(379,200.00)
PVCO			(379,200.00)
1-10	93,348.00	6.4177	599,075.51
Present Value of cash inflows			599,075.51

Net Present Value			219,875.51

Net Income	55,428.00
Depreciation on new equipment	37,920.00
Cash flows	93,348.00

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
9.00	0.4604
10.00	0.4224
PVF for 10 Years	6.4177

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Transcribed Image Text

B2B Co. is considering the purchase of equipment that wouldallow the company to add a new product to its line. The equipmentis expected to cost $379,200 with a 10-year life and no salvagevalue. It will be depreciated on a straight-line basis. The companyexpects to sell 151,680 units of the equipment’s product each year.The expected annual income related to this equipment follows.Sales$237,000CostsMaterials,labor, and overhead (except depreciation on new equipment)83,000Depreciation onnew equipment37,920Selling andadministrative expenses23,700Total costs andexpenses144,620Pretaxincome92,380Income taxes(40%)36,952Net income$55,428If at least an 9% return on this investment must be earned,compute the net present value of this investment. (PV of $1, FV of$1, PVA of $1, and FVA of $1) (Use appropriate factor(s)from the tables provided.)Chart Values are Basedon:n =i =Select ChartAmountxPV Factor=Present Value=$0Netpresent value


Sales	$	237,000
Costs
Materials,labor, and overhead (except depreciation on new equipment)		83,000
Depreciation onnew equipment		37,920
Selling andadministrative expenses		23,700
Total costs andexpenses		144,620
Pretaxincome		92,380
Income taxes(40%)		36,952
Net income	$	55,428