Question 5

a. A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $205,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $26,200. b. A machine costs $490,000, has a $21,800 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 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 $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $205,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $26,200. (Round your answers to the nearest whole dollar.) Cash Flow Select Chart Amount PV Factor Present Value Annual cash flow $ 0 Residual value 0 Net present value Required A Required B Required A Required B A machine costs $490,000, has a $21,800 salvage value, is expected to last eight years, and will generate an after-tax income of $68,000 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 = 0 Net present value Required A Required B