Exercise 24-6 Net present value LO P3

1. A new operating system for an existing machine is expected to cost $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $16,200.
2. A machine costs $530,000, has a $28,700 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 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 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $16,200. b. A machine costs $530,000, has a $28,700 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 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 $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $16,200. (Round your answers to the nearest whole dollar.) Amount PV Factor = Present Value Cash Flow Select Chart Annual cash flow Present Value of an Annuity of 1 Residual value Present Value of 1 $ 0 0 Net present value Prev 2 of 9 Next > 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 machine costs $530,000, has a $28,700 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.) Select Chart Amount PV Factor Cash Flow Annual cash flow Residual value Present Value $ 0 0 Net present value Required A Required B