K2b co is considering the purchase of equipment that would

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Reference no: EM13611302

K2B 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 $371,200 with a 6-year life and no salvage value. It will be depreciated on a straight-line basis. K2B Co. concludes that it must earn at least a 10% return on this investment. The company expects to sell 148,480 units of the equipment's product each year. The expected annual income related to this equipment follows. Sales $232,000. Costs: Materials, labor, and overhead (except depreciation) 81,000. Depreciation on new equipment 61,867. Selling and administrative expenses 23,200. Total costs and expenses 166,067. Pretax income 65,933. Income taxes (30%) 19,780. Net income $46,153. Compute the net present value of this investment.

Reference no: EM13611302

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