Exercise 11-9 Computing net present value LO P3 B28 Co. is consadering the purch

Question

Exercise 11-9 Computing net present value LO P3 B28 Co. is consadering the purchase of equipment that would allow the company to add a new product to its line The eqipment is expected to cost $371200 with a 10-year life and no salvage value. t will be depreclated on a straight-ine basis. The company expects to set 148,480 units of the equipments product each year. The expected annual income related to this equipment follows s 232,009 81,60 naterials, labor, and overheed except depreclation on neu equipment) selling and ndainistrative expenses Total costs and expenses Tecome taxes (4) Net Incpm if et least an 8% return on this investment must be earned compute the net present value afte nestment $1. and AAatsn (Use appropriate factors) from the tables provided, e of St of Net present value

Explanation / Answer

Annual Cash Flow After tax: Net Income 54408 Depreciation 37120 Cash Flow after tax 91528 Net Present Value: Year Cash Flow PVF(8%) PV of CF 0 -371200 1 -371200 1 to 10 91528 6.710081399 614160.3303 242960.3303 NPV $242,960

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