Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after tax income of $295,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $13,000 b. A machine costs $500,000, has a $24 200 salvage value is expected to last eight years, and will generate an after-tax income of $72,000 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. EV of $1. PVA of $1. and EVA of 50 (Use appropriate factors) 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 $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $295,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $13,000. Round your answers to the nearest whole dollar) Select Chart Amount & PV Factor - Prosent Value Cash Flow Annual cash flow Residual value Net present value Required B > Exercise 24-6 Net present value LO P3 . A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $295,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $13,000. b. A machine costs $500,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax income of $72,000 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 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 machine costs $500,000, has a $24,200 salvage value, is expected to last eight years, and will generate an after-tax Income of $72,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar) Select Chart Amount * PV Factor- Present Value Cash Flow (Annual cash flow. Residual value Net present value Exercise 24-11 Net present value, profitability index LO P3 Following is information on two alternative investments being considered by Tiger Co. The company requires an 8% return from it investments. (PV of $1. EV of $1. PVA of S1, and EVA of S1) (Use appropriate factor(s) from the tables provided.) Initial investment Expected net cash flows in year: Project 5 (88,000) Project X2 (136,000) 29,000 39,500 64,500 66,000 56,000 46,000 a. Compute each project's net present value. b. Compute each project's profitability index. If the company can choose only one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B Compute each project's profitability index. If the company can choose only one project, which should it choose? Profitability Index Choose Numerator: Choose Denominator: - Profitability Index Profitability index Proiectul Project x2 If the company can choose only one project, which should it choose? (Required A Exercise 24-13A Internal rate of return LO P4 Following is information on two alternative investments being considered by Tiger Co. The company requires a 7% return from its investments Initial investment Expected net cash flows in year: Project xi $ (86,800) Project X2 S(132,000) 64,500 28,000 38.500 63,500 54,500 44.500 Compute the internal rate of return for each of the projects using Excel functions. Based on internal rate of return, indicate whether each project is acceptable. (Round your answers to 2 decimal places.) IRR Acceptable? Project X1 Project X2 value LO P1, P2, P3 The following information applies to the questions displayed below Most Company has an opportunity to invest in one of two new projects. Project Y requires a $345.000 investment for new machinery with a five year life and no salvage value. Project Z requires a $345.000 Investment for new machinery with a four-year life and no salvage value. The two projects yield the following predicted annual results. The company uses straight-line depreciation, and cash flows occur evenly throughout each year PV SLFV of S1 PVA of $1. and FVA of $1 (Use appropriate factor(s) from the tables provided.) Project Y Project z $385.00 8. Sales Expenses Direct materials Direct labor Overhead including depreciation Selling and administrative expenses Total expenses Pretax income Income taxes (363) Net Income **** 53, 77.ee 138.500 38, see 46.2 * Problem 24-2A Part 4 4. Determine each project's net present value using 9% as the discount rate. Assume that cash fows occur at each year-end. (Round your Intermediate calculations.) Project Y Chart values are based on: Select Chart Present Value of an Annuity of 1 Amount * 125.000 * Present Value PV Factor - - s Present value of cash inflows Present value of cash outfiows Net present value Project Z Chart values are based on: Select Chart Present Value of an Annuity of 1 096 Amount 123.178 s PV Factor - - Present Value 5 Present value of cash infows Present value of cash outflows Net present value