Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expectd to cost $633,000 and have a useful life of six years. The system yields an incremental after-tax income of $185,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $45.000 b. A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax Income of $95,000 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. M Required A Required nces A new operating system for an existing machine is expected to cost $633,000 and have a useful life of six years. The system yields an incremental after-tax income of $185,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $45,000. (Round your answers to the nearest whole dollar.) Cash Flow Select Chart Amount PV Factor Present Value Annual cash flow Present Value of an Annuity of 1 $ 283,000 0 Residual value Present Value of 1 $ 45,000 0 Present value of cash inflows Immediate cash outflows 633,000 Net present value Required 8 > Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $633,000 and have a useful life of six years. The system yie an incremental after-tax income of $185,000 each year after deducting its straight-line depreciation. The predicted salvage value the system is $45,000 b. A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax income $95,000 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. Ey 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 a Required B A machine costs $450,000, has a $34,000 salvage value, is expected to last eight years, and will generate an after-tax Income of $95,000 per year after straight-line depreciation (Round your answers to the nearest whole dollar.) Select Chart Amount Cash Flow Annual cash flow Residual value X PV Factor Present Value $ 0 Net present value
