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Exercise 24-6 Net present value LO P3

A new operating system for an existing machine is expected to cost $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $190,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $17,600.

A machine costs $510,000, has a $31,700 salvage value, is expected to last eight years, and will generate an after-tax income of $76,000 per year after straight-line depreciation.

Assume the company requires a 10% rate of return on its investments. Compute the net present value of each potential investment. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

A new operating system for an existing machine is expected to cost $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $190,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $17,600. (Round your answers to the nearest whole dollar.)

	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cash flow = $0 Residual value = 0 Net present value

A machine costs $510,000, has a $31,700 salvage value, is expected to last eight years, and will generate an after-tax income of $76,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)

	Cash Flow Select Chart Amount x PV Factor = Present Value Annual cash flow = $0 Residual value = 0 Net present value

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