Question
A new operating system for an existing machine is expected to cost $590,000 and have a useful life of six years. The system yields an
A new operating system for an existing machine is expected to cost $590,000 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 $17,400.
A machine costs $550,000, has a $35,300 salvage value, is expected to last eight years, and will generate an after-tax income of $80,000 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.)
Complete this question by entering your answers in the tabs below. Required ARequiredB A new operating system for an existing machine is expected to cost $590,000 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 $17,400. (Round your answers to the nearest whole dollar.) Select Chart Amount x PV FactorPresent Value Cash Flow Annual cash flow Residual value Net present value Required A Required B>Step by Step Solution
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