Exercise 11-6 Net present value LO P3 A new operating system for an existing machine is expected to cost $540,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $24,600. A machine costs $560,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $88,000 per year after straight-line depreciation. Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Exercise 11-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $540,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $24,600. b. A machine costs $560,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $88,000 per year after straight-line depreciation. Assume the company requires a 12% rate of return on its investments. Compute the net present value of each potential investment (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by entering your answers in the tabs below. Required A Required B A new operating system for an existing machine is expected to cost $540,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $24,600. (Round your answers to the nearest whole dollar.) Select Chart Cash Flow Amount PV Factor Present Value X = Annual cash flow $ 0 Residual value 0 Net present value Required A Required B A machine costs $560,000, has a $33,800 salvage value, is expected to last eight years, and will generate an after-tax income of $88,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) Cash Flow Select Chart Amount PV Factor Present Value Annual cash flow $ 0 Residual value - Net present value