Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after- tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% 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 $520,000 and have a useful life of six years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. (Round your answers to the nearest whole dollar.) Cash Flow Annual cash flow Residual value Amount $ 235,000 $ 10,000 Select Chart Present Value of an Annuity of 1 Present Value of 1 Present value of cash inflows Immediate cash outflows Not present value * PV Factor Present Value 4.3553 $ 1,023,496 0.5645 5,645 $ 1,029,141 (520,000) Required B > Check my work Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of six years. The system yields an incremental after-tax Income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000. b. A machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after- tax income of $60,000 per year after straight-line depreciation. Assume the company requires a 10% 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 machine costs $380,000, has a $20,000 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 per year after straight-line depreciation (Round your answers to the nearest whole dollar.) Cash Flow Annual cash flow Residual value Amount $ 105,000 $ 20.000 Select Chart Present Value of an Annuity of 1 Present Value of 1 Present value of cash inflows Immediate cash outflows Net present value X PV Factor Present Value 5.3349 $ 560,165 0.4665 9,330 $ 569,495 (380,000)