Exercise 11-9 Computing net present value LO P3 B2B Co. is considering the purchase of...
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Exercise 11-9 Computing net present value LO P3 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 12-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. $ 238,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total costs and expenses Pretax income Income taxes (30%) Net income 83,000 31,733 23,800 138,533 99,467 29,840 $ 69,627 If at least an 10% return on this investment must be earned, compute the net present value of this investment. (PV of $1, FV of $1, PV of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on: n = i = % Select Chart Amount PV Factor = Present Value Net present value
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