B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. Theequipment costs $379,200 and has a 12-year life and no salvage value. B2B Company requires at least an 8% return on thisinvestment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1)Note: Use appropriate factor(s) from the tables provided.Sales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation-EquipmentSelling, general, and administrative expensesIncome(a) Compute the net present value of this investment.(b) Should the investment be accepted or rejected on the basis of net present value?Complete this question by entering your answers in the tabs below.Required A Required BCompute the net present value of this investment.Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar.Years 1 through 12Net present valueAnnual Net CashFlowsXPresentValue ofAnnuity at8%$ 237,00083,00031,60023,700$ 98,700==Present Valueof Net CashFlows B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. Theequipment costs $379,200 and has a 12-year life and no salvage value. B2B Company requires at least an 8% return on thisinvestment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1)Note: Use appropriate factor(s) from the tables provided.Sales of new productExpensesMaterials, labor, and overhead (except depreciation)Depreciation-EquipmentSelling, general, and administrative expensesIncomeComplete this question by entering your answers in the tabs below.(a) Compute the net present value of this investment.(b) Should the investment be accepted or rejected on the basis of net present value?Required A Required B$ 237,000Should the investment be accepted or rejected on the basis of net present value?Should the investment be accepted or rejected on the basis of net present value?83,00031,60023,700$ 98,700

Net Income$98,700Add: Depreciation$31,600Annual Cash Flow ($98,600 + $31,600)$130,300Annual Cash…

B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $379,200 and has a 12-year life and no salvage value. B2B Company requires at least an 8% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required Compute the net present value of this investment. Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar. Years 1 through 12 Net present value Annual Net Cash Flows x $ 237,000 83,000 31,600 23,700 $ 98,700 Present Value of Annuity at 8% = Present Value of Net Cash Flows

B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $379,200 and has a 12-year life and no salvage value. B2B Company requires at least an 8% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product Expenses Materials, labor, and overhead (except depreciation) Depreciation-Equipment Selling, general, and administrative expenses Income (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value? Complete this question by entering your answers in the tabs below. Required A Required Compute the net present value of this investment. Note: Round your present value factor to 4 decimals and other final answers to the nearest whole dollar. Years 1 through 12 Net present value Annual Net Cash Flows x $ 237,000 83,000 31,600 23,700 $ 98,700 Present Value of Annuity at 8% = Present Value of Net Cash Flows

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 2P

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B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $379,200 and has a 12-year life and no salvage value. B2B Company requires at least an 8% return on this investment. The expected annual income for each year from this equipment follows: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Sales of new product $ 237,000 Expenses Materials, labor, and overhead (except depreciation) 83,000 Depreciation—Equipment 31,600 Selling, general, and administrative expenses 23,700 Income $ 98,700 (a) Compute the net present value of this investment.(b) Should the investment be accepted or rejected on the basis of net present value?
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