80.2K

Verified Solution

Link Copied!

B$2$B Company is considering the purchase of equipment that would allow the company to add a

new product to its line. The equipment costs $$377,600$ and has a $6-$year life and no salvage value.

B$2$B Company requires at least an $9\%$ return on this investment. The expected annual income for

each year from this equipment follows: $($PV of $$1,$ FV of $$1,$ PVA of $$1,$ and FVA of $$1)$

Note: Use appropriate factor$($s$)$ from the tables provided.

$($a$)$ Compute the net present value of this investment.

$($b$)$ Should the investment be accepted or rejected on the basis of net present value?

Complete this question by entering your answers in the tabs below.

Compute the net present value of this investment.

Note: Round your present value factor to $4$ decimals and other final answers to the nearest whole dollatB$2$B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $$377,600$ and has a $6-$year life and no salvage value. B$2$B Company requires at least an $9\%$ return on this investment. The expected annual income for each year from this equipment follows: $($PV of $$1,$ FV of $$1,$ PVA of $$1,$ and FVA of $$1)$

Note: Use appropriate factor$($s$)$ from the tables provided.

Sales of new product $ $236,000$

Expenses

Materials, labor, and overhead $($except depreciation$)83,000$

Depreciation$$Equipment $62,933$

Selling, general, and administrative expenses $23,600$

Income $ $66,467$

$($a$)$ Compute the net present value of this investment.

$($b$)$ Should the investment be accepted or rejected on the basis of net present value?

Answer & Explanation Solved by verified expert

See Answer