1. A new operating system for an existing machine is expected to cost $750,000 and have a useful life of six years. The system yields an incremental after-tax income of $240,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $20,800.
2. A machine costs $480,000, has a $27,500 salvage value, is expected to last eight years, and will generate an after-tax income of $66,000 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.)

Select Chart Amount x PV Factor Present Value Cash Flow Annual cash flow Residual value 11 $ 0 0 = Net present value