Question
6) 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
6)
| 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 $1andPVA of $1)(Use appropriate factor(s) from the tables provided.) |
| a. | A new operating system for an existing machine is expected to cost $770,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $12,400. |
| b. | A machine costs $520,000, has a $23,000 salvage value, is expected to last eight years, and will generate an after-tax income of $84,000 per year after straight-line depreciation. |
|
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Accounting And Social Theory An Introduction
Authors: Lisa Jack
1st Edition
1138100714, 9781138100718
