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a) A new operating system for an existing machine is expected to cost $750,000 and have a useful life of six years. The system yields an incremental after-tax income of $195,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $22,400.

b) A machine costs $470,000, has a $37,100 salvage value, is expected to last eight years, and will generate an after-tax income of $66,000 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.)

Required A

A new operating system for an existing machine is expected to cost $750,000 and have a useful life of six years. The system yields an incremental after-tax income of $195,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $22,400. (Round your answers to the nearest whole dollar.)

Cash Flow	Select Chart	Amount	x	PV Factor	=	Present Value
Annual cash flow					=	$0
Residual value					=	0
	Net present value

Required B

A machine costs $470,000, has a $37,100 salvage value, is expected to last eight years, and will generate an after-tax income of $66,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)

Cash Flow	Select Chart	Amount	x	PV Factor	=	Present Value
Annual cash flow					=	$0
Residual value					=	0
	Net present value