A new operating system for an existing machine is expected to cost $760,000 and have a...

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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.
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.)
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
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

Answer & Explanation Solved by verified expert

3.7 Ratings (520 Votes)

Requirement ACost of Machine 760000Salvage Value 25400Useful Life 6 yearsAnnual Depreciation Cost of Machine Salvage Value UsefulLifeAnnual See Answer

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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.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 ARequired BA 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.)Complete this question by entering your answers in thetabs below.Required ARequired BA 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 FlowSelect ChartAmountxPV Factor=Present ValueAnnual cashflow=$0Residualvalue=0Netpresent valueCash FlowSelect ChartAmountxPV Factor=Present ValueAnnual cashflowPresent Value of an Annuity of 1=$0ResidualvaluePresent Value of 1=0Presentvalue of cash inflowsPresentvalue of cash inflowsNetpresent value