Overhaul Present System Purchase New System Purchase cost when new ... . S300. 000 $400,000 Accumulated depreciation. . . S220. 000 Overhaul costs needed now. S250,000 Annual cash operating costs ... S120,000 $90,000 Salvage value now ... ... . . . S90,000 Salvage value in ten years ... S30,000 $80,000 Working capital required ... $50,000 The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The working capital required under the new system would be released for use elsewhere at the conclusion of the project. Both alternatives are expected to have a useful life of ten years. The net present value of the new system alternative (rounded to the nearest hundred dollars) is: $(862,900) $(552,900) $(987,400) $(758,400) (Ignore income taxes in this problem. ) Oriol Inc. is considering the acquisition of equipment that costs $360,000 and has a useful life of 6 years with no salvage value. The incremental net cash flows that would be generated by the equipment are: Incremental net cash flows Year 1 If the discount rate is 19%, the net present value of the investment is closest to: $346,000 $38,667 $121,841 $398,667