connect 25-3
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 6-year life and no salvage value. It will be depreciated on a straight-line basis. K2B Co. concludes that it must earn at least a 9% return on this investment. The company expects to sell 152,960 units of the equipment’s product each year. The expected annual income related to this equipment follows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
| | |||
| Sales | $ | 239,000 | |
| Costs | |||
| Materials, labor, and overhead (except depreciation) | 84,000 | ||
| Depreciation on new equipment | 63,733 | ||
| Selling and administrative expenses | 23,900 | ||
| Total costs and expenses | 171,633 | ||
| Pretax income | 67,367 | ||
| Income taxes (30%) | 20,210 | ||
| Net income | $ | 47,157 | |
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.)
10 years ago
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