Warner Corporation is considering the acquisition of a new machine that costs $367,000. The machine is expected to have a four-year service life and will produce annual savings in cash operating costs of $117,000. Warner uses the optional straight-line method of depreciation and depreciates the asset over its four-year service life. The company is subject to a 40% income tax rate, has an after-tax hurdle rate of 10%.

Required:

A. Determine the annual after-tax cash flows that result from acquisition of the machine. (Do not round intermediate calculations and round final answers to the nearest dollar.) Year 1 Year 2 Year 3 Year 4 Year 5

B. Calculate the machine's net present value. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round final answers to the nearest dollar.)

Warner Corporation is considering the acquisition of a new machine that costs $367,000. The machine is expected to have a four-year service life and will produce annual savings in cash operating costs of $117,000. Warner uses the optional straight-line method of depreciation and depreciates the asset over its four-year service life. The company is subject to a 40% income tax rate, has an after-tax hurdle rate of 10%. Year FV of an PV of an FV of $1 at ordinary annuity PV of $1 at ordinary annuity 10% at 10% 10% at 10% 1.100 1.000 0.909 0.909 1.210 2.100 0.826 1.736 1.331 3.310 0.751 2.487 1.464 4.641 0.683 3.170 1.611 6.105 0.621 3.791 1.772 7.716 0.564 4.355