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Exercise 24-13 (Algo) Net present value of an annuity LO P3

B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $376,000 and has a 10-year life and no salvage value. B2B 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) (Use appropriate factor(s) from the tables provided.)

Sales of new product	$ 235,000
Expenses
Materials, labor, and overhead (except depreciation)	82,000
DepreciationEquipment	37,600
Selling, general, and administrative expenses	23,500
Income	$ 91,900

(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.

• Required A

• Required B

Compute the net present value of this investment. (Round your present value factor to 4 decimals and other final answers to the nearest whole dollar.)

	Annual Net Cash Flows x Present Value of Annuity at 9% = Present Value of Net Cash Flows Years 1 through 10 $ x = $ Initial investments Net present value $

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