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

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 $360,000 with a 6-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 144,000 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.)

Compute the net present value of this investment. (Round your intermediate calculations to the nearest dollar amount.)

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 $360,000 with a 6-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 144,000 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.)

Explanation / Answer

Cash flows after tax = net income + depreciation

= $36750 + $30000 = $66750

N = 6

I = 8%

Cash outflow. $360000. * 1. = $360000

Present value = $66750. * 4.6228. = $308571.90

Net present value. = $51428.10

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.