a. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. The system yields an incremental after-tax income of $220,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $13,000. b. A machine costs $540,000, has a $22,100 salvage value, is expected to last eight years, and will generate an after-tax income of $70,000 per year after straight-line depreciation Assume the company requires a 12% 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.) Required A Required B A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. The system yields an incremental after-tax income of $220,000 each year after deeducting its straight-line depreciation. The predicted salvage value of the system is $13,000. (Round your answers to the nearest whole dollar.) Select Chart Cash Flow Amount x PV Factor Present Value Annual cash flow 0 Residual value 0 Net present value Required B Required A A machine costs $540,000, has a $22,100 salvage value, is expected to last eight years, and will generate an after-tax income of $70,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) Select Chart Cash Flow Amount Present Value x PV Factor Annual cash flow $ Residual value Net present value TABLE B.1 p 1/(1i Present Value of 1 Rate 5% 8% 9% Perlods 1% 2% 3% 4% 6% 7% 10% 12% 15% 0.9434 1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9346 0.9259 0.9174 0.9091 0.8929 0.8696 2. 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.7972 0.7561 0.9151 3 0.9706 0.9423 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7118 0.6575 4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6355 0.5718 0.9515 0.8219 0.6209 0.9057 0.8626 0.7835 0.7473 0.7130 0.6806 0.6499 0.5674 0.4972 0.7903 6 0.9420 0.8880 0.8375 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5066 0.4323 0.8706 0.8131 0.6651 7 0.9327 0.7599 0.7107 0.6227 0.5835 0.5470 0.5132 0.4523 0.3759 8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4039 0.3269 0.9143 0.6446 0.4604 0.2843 0.8368 0.7664 0.7026 0.5919 0.5439 0.5002 0.4241 0.3606 0.8203 10 0.9053 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3220 0.2472 0.2149 11 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.2875 0.8874 0.8787 0.1869 12 0.7885 0.7014 0.6246 0.5568 0,4970 0.4440 0.3971 0.3555 0.3186 0.2567 0.2292 13 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.1625 0.3878 0.1413 14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3405 0.2992 0.2633 0.2046 0.4173 15 0.8613 0.7430 0.6419 0.5553 0.4810 0.3624 0.3152 0.2745 0.2394 0.1827 0.1229 16 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1631 0.1069 0.4363 0.3714 0.2311 0.1456 17 0.8444 0.7142 0.6050 0.5134 0.3166 0.2703 0.1978 0.0929 0.2120 18 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.1799 0.1300 0.0808 0.3305 19 0.8277 0.6864 0.5703 0.4746 0.3957 0.2765 0.2317 0.1945 0.1635 0.1161 0.0703 0.1486 20 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1037 0.0611 0.1160 0.0923 25 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0,0588 0.0304 0.0994 30 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0754 0.0573 0.0334 0.0151 35 0.7059 0.5000 0.3554 0.2534 0.1813 0.1301 0.0937 0.0676 0.0490 0.0356 0.0189 0.0075 0.1420 0.0460 0.0318 40 0.6717 0.4529 0.3066 0.2083 0.0972 0.0668 0.0221 0.0107 0.0037 Used to compute the present value of a known future amount. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5,000 in 6 years from today? Using the factors of n- 12 and i 5% (12 semiannual periods and a semiannual rate of 5%), the factor is 0.5568. You would need to invest $2,784 today ($5,000 x 0.5568)