Question: After evaluating the risk of the investment described in Exercise

After evaluating the risk of the investment described in Exercise, B2B Co. concludes that it must earn at least an 8% return on this investment. Compute the net present value of this investment. (Round the net present value to the nearest dollar.)
In exercise
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225,000
Costs
Materials, labor, and overhead (except depreciation on new equipment) . . . . 20,000
Depreciation on new equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500
Total costs and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,500
Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,500
Income taxes (30%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,750
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,750

View Solution:


Sale on SolutionInn
Sales1
Views95
Comments
  • CreatedApril 23, 2015
  • Files Included
Post your question
5000