Hello tutor give correct calculation B2B Company is considering the purchase of equipment that wouldallow the company to add a new product to its line. The equipment costs$312,000 and has a 12-year life and no salvage value. The expectedannual income for each year from this equipment follows.Sales of new product - $195,000Expenses:Materials, labor, and overhead (except depreciation) - 104,000Depreciation-Equipment - 26,000Selling, general, and administrative expenses - 19,500Income $45,500-A) Compute the annual net cash flow.B) Compute the payback period.C) Compute the accounting rate of return for this equipment.

Step 1: Define Net Cash flow and calculate it using the formula (Net cash flow= sales- cash…

Answered: B2B Company is considering the purchase…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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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 $240,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 150,000 Expenses Materials, labor, and overhead (except depreciation) 80,000 Depreciation—Equipment 20,000 Selling, general, and administrative expenses 15,000 Income $ 35,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment.

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