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4 Exercise 24-6 Net present value LO P3 12.5 points a. A new operating system for an existing machine is expected to cost $820,000 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 $100,000. b. A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation. eBook 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.) Hint Complete this question by entering your answers in the tabs below. Print Required A Required B References A new operating system for an existing machine is expected to cost $820,000 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 $100,000. (Round your answers to the nearest whole dollar.) Cash Flow Annual cash flow Residual value Select Chart Present Value of an Annuity of 1 Present Value of 1 Present value of cash inflows Immediate cash outflows Net present value Amount x PV Factor = Present Value $ 360,000 x 4.1114 = $ 1,480,104 $ 100,000 0.5066 = 50,660 $ 1,530,764 Required A Required B 4 Exercise 24-6 Net present value LO P3 12.5 points a. A new operating system for an existing machine is expected to cost $820,000 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 $100,000. b. A machine costs $560,000, has a $56,000 salvage value, is expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation. eBook 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.) Hint Complete this question by entering your answers in the tabs below. Print Required A Required B References A machine costs $560,000, has a $56,000 salvage value, expected to last eight years, and will generate an after-tax income of $150,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) Amount Cash Flow Annual cash flow Residual value Select Chart Present Value of an Annuity of 1 Present Value of 1 Present value of cash inflows Immediate cash outflows x PV Factor = Present Value $ 0 0 Net present value Required A Required B