Question

Exercise 24-9 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 $372,800 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 149,120 units of the equipment's product each year. The expected annual income related to this equipment follows. $ 230,000 Sales Costa Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Selling and administrative expenses Total coats and expenses Pretax income Income taxes (205) Net Deo 82.000 31,067 23. 300 136,367 6,633 19.327 77.306 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. PVA of $1, and FVA of $D) (Use appropriate factor(s) from the tables provided.) Chart Values are Based on 1041 Amount K L PV Factor - Select Chart Present Value of an Annuity of 1 T Present Value 0 Net present value

Answer 1

Ans:

Chart Values are Based on:
n =	12
i =	10%
Select Chart	Amount	x	PV Factor	=	Present Value
Present Value of an Annuity of 1	$108,373	x	6.8137	=	$738421
Present value of cash inflows					$738,421
Present value of cash outflows					($372,800)
Net present value					$365,621

Note:

108373=31067+77306