Godo AAU Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $371,200 and has a 6-year life and no salvage value. AAU Company requires at least an 9% 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 $1) Note: Use appropriate factor(s) from the tables provided. Sales of new product$ 232,000Expenses Materials, labor, and overhead (except depreciation)81,000Depreciation—Equipment61,867Selling, general, and administrative expenses23,200Income$ 65,933 (a) Compute the net present value of this investment. (b) Should the investment be accepted or rejected on the basis of net present value?
Godo
AAU Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $371,200 and has a 6-year life and no salvage value. AAU Company requires at least an 9% 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 $1)
Note: Use appropriate factor(s) from the tables provided.
Sales of new product$ 232,000Expenses Materials, labor, and overhead (except
(a) Compute the
(b) Should the investment be accepted or rejected on the basis of net present value?
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