Exercise 24-6 Net present value LO P3

1. A new operating system for an existing machine is expected to cost $690,000 and have a useful life of six years. The system yields an incremental after-tax income of $200,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $20,200.
2. A machine costs $400,000, has a $36,200 salvage value, is expected to last eight years, and will generate an after-tax income of $62,000 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 $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)