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 $374,400 with a 4-year life and no salvage value. It will be depreciated on a straight line basis. The company expects to sell 149,760 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 234,000 ) Costa Materials, labor, and overhead except depreciation on new equipa Depreciation on new equipo Selling and administrative expenses Total costs and expenses Peta Inc come taxes (80 $2,000 93,600 23, 400 199,000 25.000 10.500 24,500 If at least an 10% 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 PVA of S1) (Use appropriate factor(s) from the tables provided.) Chart Values are based on Select Chart Amount PV Factor Present Value Not present yolue

Answer 1

	Chart Values are Based on: n = 4 i = 10% Select Chart Amount x PV Factor = Present Value Present Value of an Annuity of 1 $118100 x 3.1699 = $374365 Present value of cash inflows $374365 Present value of cash outflows (374400) Net present value ($35)

Cash Inflow per year = Net Income + Depreciation

           = $24500 + $93600 = $118100