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Can someone please explain how we got the PV factors in the solution part? Why...

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Accounting

Can someone please explain how we got the PV factors in the solution part? Why did we use two different table to calculate the PV factors?

Thanks very much

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Bay Boat Company is interested in replacing a molding machine with a new improved model. The old machine has a salvage value of $20,000 now and a predicted salvage value of $4,000 in six years, if rebuilt. If the old machine is kept, it must be rebuilt in one year at a predicted cost of $40,000. The new machine costs $160,000 and has a predicted salvage value of $28,000 at the end of six years. The new machine will generate cash savings of $40,000 for each of the first three years and $20,000 for each year of its remaining six-year life. Ignore income taxes. Solution: PV ? Predicted cash flows Initial investment $(160,000) Salvage of old 20,000 Annual operations 40,000 Annual operations 20,000 Save by not rebuilding 40,000 Incremental salvage of new24,000 Net present value Year or PV of years factor cash flows 0 1.000 $(160,000) 0 1.000 20,000 1-3 2.322 92,880 4-6 (3.889-2.332) 31,340 1 0.877 35,080 6 0.456 10,944 $30,244

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