4.value: 13.00 points Exercise 25-6 Net present value LO P3 Compute the net present value of each potential investment. Assume the company requires a 12% rate of return on its investments. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) a. A new operating system for an existing machine is expected to cost $660,000 and have a useful life of six years. The system yields an incremental after-tax income of $195,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $20,800. b. A machine costs $500,000, has a $34,400 salvage value, is expected to last eight years, and will generate an after-tax income of $80,000 per year after straight-line depreciation. HintsReferenceseBook & Resources

a. A new operating system for an existing machine is expected to cost $660,000 and have a useful life of six years. The system yields an incremental after-tax income of $195,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $20,800 Present Select Chart Cash Flow Amount X Factor Value Annual cash 0.1200 flow E Residual value Net present value b.A machine costs $500,000, has a $34,400 salvage value, is expected to last eight years, and will generate an after-tax income of $80,000 per year after straight-line depreciation Present Select Chart Cash Flow Amount X Factor Value 0 Annual cash flow E Residual Value Net present value