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Compute the net present value of this investment

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Reference no: EM133018353

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 $372,800 with a 4-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.

Sales $233,000

Costs Materials, labor, and overhead (except depreciation on new equipment) 82,000

Depreciation on new equipment 93,200

Selling and administrative expenses 23,300

Total costs and expenses 198,500

Pretax income 34,500

Income taxes (40%) 13,800

Net income $20,700

If at least an 9% return on this investment must be earned, compute the net present value of this investment.

Reference no: EM133018353

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