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LB Division of BulbCo had Net Income after tax (NIAT) totaling $56,700, sales totaling $600,000, $4,000 in interest cost, and a 30 percent income tax rate for 2017. Invested capital totaled $540,000. BulbCo's required rate of return is 8 percent and its cost of capital is 6 percent. LB expects sales to increase by 10% in 2018 resulting in an increase in NIAT of 15% without any new investment. However, LB Division is considering an investment in a new machine on January 1, 2018 that will generate further additional annual sales of $78,000 and additional annual operating expenses (other than depreciation) totaling $36,000. The cost of the new machine is $120,000 with an estimated salvage value of $15,000 at the end of its 4-year estimated life. LB will pay cash for the machine. (Show all supporting calculations). Without the investment interest expense is expected to be $5,000 in 2018. With the new investment the interest expense is expected to be $8,000. To simplify the problem use invested capital at the beginning of each year rather than the average invested capital. LB Division of BulbCo had Net Income after tax (NIAT) totaling $56,700, sales totaling $600,000, $4,000 in interest cost, and a 30 percent income tax rate for 2017. Invested capital totaled $540,000. BulbCo's required rate of return is 8 percent and its cost of capital is 6 percent. LB expects sales to increase by 10% in 2018 resulting in an increase in NIAT of 15% without any new investment. However, LB Division is considering an investment in a new machine on January 1, 2018 that will generate further additional annual sales of $78,000 and additional annual operating expenses (other than depreciation) totaling $36,000. The cost of the new machine is $120,000 with an estimated salvage value of $15,000 at the end of its 4-year estimated life. LB will pay cash for the machine. (Show all supporting calculations). Without the investment interest expense is expected to be $5,000 in 2018. With the new investment the interest expense is expected to be $8,000. To simplify the problem use invested capital at the beginning of each year rather than the average invested capital

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