Sunday, 22 June 2014

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 $380,800 with a 7-year life and no salvage value. It will

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 $380,800 with a 7-year life and no salvage value. It will be depreciated on a straight-line basis. B2B Co. concludes that it must earn at least a 9% return on this investment. The company expects to sell 152,320 units of the equipment’s product each year. The expected annual income related to this equipment follows. (PV of $1FV of $1PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
  


  Sales $ 238,000
  Costs    
     Materials, labor, and overhead (except depreciation) 83,000
     Depreciation on new equipment 54,400
     Selling and administrative expenses 23,800
  

  Total costs and expenses 161,200
  

  Pretax income 76,800
  Income taxes (30%) 23,040
  

  Net income $ 53,760
  






Compute the net present value of this investment. (Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount.)
rev: 05_12_2014_QC_49497


Explanation: