- A new operating system for an existing machine is expected tocost $720,000 and have a useful life of six years. The systemyields an incremental after-tax income of $275,000 each year afterdeducting its straight-line depreciation. The predicted salvagevalue of the system is $21,800.
- A machine costs $510,000, has a $33,800 salvage value, isexpected to last eight years, and will generate an after-tax incomeof $66,000 per year after straight-line depreciation.
Assume the company requires a 10% rate of return on itsinvestments. Compute the net present value of each potentialinvestment. (PV of $1, FV of $1, PVA of $1 and FVA of $1)(Use appropriate factor(s) from the tablesprovided.)
