1. A new operating system for an existing machine is expected tocost $760,000 and have a useful life of six years. The systemyields an incremental after-tax income of $265,000 each year afterdeducting its straight-line depreciation. The predicted salvagevalue of the system is $25,400.
2. A machine costs $420,000, has a $35,900 salvage value, isexpected to last eight years, and will generate an after-tax incomeof $68,000 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.)

Complete this question by entering your answers in thetabs below.

• Required A
• Required B

A new operating system for an existing machine is expected tocost $760,000 and have a useful life of six years. The systemyields an incremental after-tax income of $265,000 each year afterdeducting its straight-line depreciation. The predicted salvagevalue of the system is $25,400. (Round your answers to the nearestwhole dollar.)

	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cashflow Present Value of an Annuity of 1 = $0 Residualvalue Present Value of 1 = 0 Presentvalue of cash inflows Presentvalue of cash inflows Netpresent value

• Complete this question by entering your answers in thetabs below.

• Required A
• Required B

• A machine costs $420,000, has a $35,900 salvage value, isexpected to last eight years, and will generate an after-tax incomeof $68,000 per year after straight-line depreciation. (Round youranswers to the nearest whole dollar.)

  	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cashflow = $0 Residualvalue = 0 Netpresent value