Question
A company is considering the purchase of equipment that would allow the company to add a new product toits line. The equipment is expected to cost $382,400 with a 12-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 152,960 units of the equipment's product each year. The expected annual income related to this equipment follows:

$ 239,000 Sales Costs Materials, labor, and overhead (except depreciation on new equipment) Depreciation on new equipment Sel
If at least an 8% return on this investment must be earned, compute the net present value of this investment. (PV of $1. EV o
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Answer #1
Net income 79386
Add: Depreciation 31867
Annual net cash flow 111253
PV factor of $1 annuity (PVA of $1) 7.5361 =(1-(1.08)^-12)/0.08
Chart Values are Based on:
n = 12
i = 8%
Select Chart Amount x PV Factor = Present Value
Present Value of an Annuity of 1 111253 x 7.5361 = 838414
Present value of cash inflows 838414
Present value of cash outflows (382400)
Net present value 456014
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