- A new operating system for an existing machine is expected tocost $680,000 and have a useful life of six years. The systemyields an incremental after-tax income of $155,000 each year afterdeducting its straight-line depreciation. The predicted salvagevalue of the system is $26,000.
- A machine costs $530,000, has a $24,200 salvage value, isexpected to last eight years, and will generate an after-tax incomeof $76,000 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.)
A new operating system for an existing machine is expected tocost $680,000 and have a useful life of six years. The systemyields an incremental after-tax income of $155,000 each year afterdeducting its straight-line depreciation. The predicted salvagevalue of the system is $26,000. (Round your answers to the nearestwhole dollar.)
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| | Cash Flow | Select Chart | Amount | x | PV Factor | = | Present Value | | Annual cash flow | | | | | = | $0 | | Residual value | | | | | = | 0 | | | | | | | | | Net present value | |
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A machine costs $530,000, has a $24,200 salvage value, isexpected to last eight years, and will generate an after-tax incomeof $76,000 per year after straight-line depreciation. (Round youranswers to the nearest whole dollar.)
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| | Cash Flow | Select Chart | Amount | x | PV Factor | = | Present Value | | Annual cash flow | | | | | = | $0 | | Residual value | | | | | = | 0 | | | | | | | | | Net present value | |
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