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 $225,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,200.
2. A machine costs $550,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax income of $74,000 per year after straight-line depreciation.

Assume the company requires a 10% 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 $780,000 and have a useful life of six years. The system yields an incremental after-tax income of $225,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,200. (Round your answers to the nearest whole dollar.) Cash Flow Select Chart Amount PV Factor Present Value Annual cash flow = Residual value = Net present value Required A Required B > Required A Required B A machine costs $550,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax income of $74,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) Cash Flow Select Chart Amount PV Factor Present Value Annual cash flow = Residual value Net present value