Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $730,000 and have a useful life of six years. The system yields an incremental after-tax income of $165,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,000. b. A machine costs $550,000, has a $21,500 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 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 A Required B A new operating system for an existing machine is expected to cost $730,000 and have a useful life of six years. The system yields an incremental after-tax income of $ 165,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23,000. (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 Required A Required B Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $730,000 and have a useful life of six years. The system yields an incremental after-tax income of $165,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $23.000. b. A machine costs $550,000, has a $21,500 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 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 A Required B A machine costs $550,000, has a $21,500 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
