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 $380,800 with a 8-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,320 units of the equipment's product each year. The expected annual income related to this equipment follows. If at least an 10% 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.

Explanation / Answer

B2B Co. All Amounts in $ Net Cash Inflows from Sales per year Net Income 58520 Depreciation (Non-Cash) 47600 Post Tax Cash Inflows 106120 Rate of Return for Project 10% Factor i No. of Years 8 Factor n Cash Outflow (T=0) 380800 Based on the information given above, The Net Present Value of the equipment works out to $ 168,493.06

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