Reference no: EM132968649
Question - 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.
Sales $238,000
Materials, labor, and overhead (except depreciation on new equipment) 83,000
Depreciation on new equipment 31,733
Selling and administrative expenses 23,800
Total costs and expenses 138,533
Pretax income 99,467
Income taxes (40%) 39,787
Net income $59,680
If at least a 9% return on this investment must be earned, compute the net present value of this investment.
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