1. 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 $285,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $24,400.
2. A machine costs $420,000, has a $36,500 salvage value, is expected to last eight years, and will generate an after-tax income of $88,000 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.)

Cash Flow	Select Chart	Amount	x	PV Factor	=	Present Value
Annual cash flow	Present Value of 1	$410,933	x	0.5066	=	$208,179
Residual value					=	0
	Immediate cash outflows
	Present value of cash inflows
	Net present value

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