Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $769,000 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 $85,000 b. A machine costs $530,000, has a $50,000 salvage value, Is expected to last eight years, and will generate an after-tax income of $135,000 per year after straight-line depreciation Assume the company requires a 13% rate of return on its investments, compute the net present value of each potential investment (PV of $1. FV of $1. PVA of S1, 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 new operating system for an existing machine is expected to cost $ 769,000 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 savage value of the system is $85,000. (Round your answers to the nearest whole dollar) Cash Flow Annual cash flow Residual value Amount $ 339,000 $ 85,000 * PV Factor Present Value $ 0 Select Chart Present Value of an Annuity of 1 Present Value of 1 Present value of cash inflows Immediate cash outflows Not present value Required B Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $769,000 and have a useful life of six years. The system ylelds an incremental after-tax income of $225,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $85,000 b. A machine costs $530,000, has a $50,000 salvage value, is expected to last eight years, and will generate an after-tax income of $135,000 per year after straight-line depreciation Assume the company requires a 13% 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 A Required B A machine costs $530,000, has a $50,000 salvage value, is expected to last eight years, and will generate an after-tax income of $135,000 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 Present Value of an Annuity of 1 $ Residual value Present Value of 1 Present value of cash innow 0 0 Not present value
