Question
In: Finance
B2B Co. is considering the purchase of equipment that would allow the company to add a...
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 $379,200 with a 10-year life and no salvage value. It will be depreciated on a straight-line basis. The company expects to sell 151,680 units of the equipment’s product each year. The expected annual income related to this equipment follows.
| Sales | $ | 237,000 | |
| Costs | |||
| Materials, labor, and overhead (except depreciation on new equipment) | 83,000 | ||
| Depreciation on new equipment | 37,920 | ||
| Selling and administrative expenses | 23,700 | ||
| Total costs and expenses | 144,620 | ||
| Pretax income | 92,380 | ||
| Income taxes (40%) | 36,952 | ||
| Net income | $ | 55,428 |
If at least an 9% return on this investment must be earned,
compute the net present value of this investment. (PV of $1, FV of
$1, PVA of $1, and FVA of $1) (Use appropriate factor(s)
from the tables provided.)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Solutions
Expert Solution
| Chart values are based on | |||
| n = 10 Years | |||
| I = 9% | |||
| Select Chart | Amount | PV Factor = | Present Value |
| Initial Investment | (379,200.00) | 1.00 | (379,200.00) |
| PVCO | (379,200.00) | ||
| 1-10 | 93,348.00 | 6.4177 | 599,075.51 |
| Present Value of cash inflows | 599,075.51 | ||
| Net Present Value | 219,875.51 | ||
| Net Income | 55,428.00 | ||
| Depreciation on new equipment | 37,920.00 | ||
| Cash flows | 93,348.00 | ||
| Time | PVF at 9% | ||
| 1.00 | 0.9174 | ||
| 2.00 | 0.8417 | ||
| 3.00 | 0.7722 | ||
| 4.00 | 0.7084 | ||
| 5.00 | 0.6499 | ||
| 6.00 | 0.5963 | ||
| 7.00 | 0.5470 | ||
| 8.00 | 0.5019 | ||
| 9.00 | 0.4604 | ||
| 10.00 | 0.4224 | ||
| PVF for 10 Years | 6.4177 | ||
jeff jeffy answered 10 months agoRelated Solutions
B2B Co. is considering the purchase of equipment that would allow the company to add a...
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 10-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
Costs
Materials, labor, and overhead (except depreciation on new
equipment)
83,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $425,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $25,000 at the
end of the project in 5 years. Sales would be $275,000 per year,
with annual fixed costs of $47,000 and variable costs equal to 35
percent of sales. The project would require an investment of
$25,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $440,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $54,000 at the
end of the project in 5 years. Sales would be $287,000 per year,
with annual fixed costs of $50,000 and variable costs equal to 37
percent of sales. The project would require an investment of
$31,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $490,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $84,000 at the
end of the project in 5 years. Sales would be $327,000 per year,
with annual fixed costs of $60,000 and variable costs equal to 35
percent of sales. The project would require an investment of
$51,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $470,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $72,000 at the
end of the project in 5 years. Sales would be $311,000 per year,
with annual fixed costs of $56,000 and variable costs equal to 37
percent of sales. The project would require an investment of
$43,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $475,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $75,000 at the
end of the project in 5 years. Sales would be $315,000 per year,
with annual fixed costs of $57,000 and variable costs equal to 38
percent of sales. The project would require an investment of
$45,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $505,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $93,000 at the
end of the project in 5 years. Sales would be $339,000 per year,
with annual fixed costs of $63,000 and variable costs equal to 38
percent of sales. The project would require an investment of
$57,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $460,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $66,000 at the
end of the project in 5 years. Sales would be $303,000 per year,
with annual fixed costs of $54,000 and variable costs equal to 35
percent of sales. The project would require an investment of
$39,000...
Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect...
Eggz, Inc., is considering the purchase of new equipment that
will allow the company to collect loose hen feathers for sale. The
equipment will cost $440,000 and will be eligible for 100 percent
bonus depreciation. The equipment can be sold for $54,000 at the
end of the project in 5 years. Sales would be $287,000 per year,
with annual fixed costs of $50,000 and variable costs equal to 37
percent of sales. The project would require an investment of
$31,000...
“MLK Co” is a manufacturing company which is considering the purchase of a new equipment. The...
“MLK Co” is a manufacturing company which is considering the
purchase of a new equipment. The below given summarizes all the
information related to the equipment:
-Equipment’s price: $180,000 -Shipping: $20,000
-Payment to find a good place to install the equipment:
$30,000
-Useful Life : 4 years
-Depreciation Method: MACRS – 3 year class
-Total Revenues/ year: $100,000 -Operating costs (Excluding
Depreciation)/year: $25,000
-Salvage Value: $10,000 -Increase in Current Asset: $23,000
-Increase in Current liabilities (Except N/P): $8,000 -WACC: 9%...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
- Do we have any online or offline tool to convert c and cpp programs into MIPS...
- -what is the pH of HCl 0,1M and NaCl 0,1M mixed together solution? -What is the...
- function X=extractDWT(x_train,startS,endS,wStep,wRange) % x_train = input signal % startS = from second % endS = end...
- Do you agree that Social Loafing is similar to Theory X. Give an example to support...
ADVERTISEMENT