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Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $17,000. b. A machine costs $570,000, has a $30,200 salvage value, is expected to last eight years, and will generate an after-tax income of $80,000 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. EV 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 $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $17,000. (Round your answers to the nearest whole dollar.) PV Factor Cash Flow Annual cash flow Residual value Select Chart Present Value of an Annuity of 1 Present Value of 1 Amount x $ 328,833 x - = Present Value $ Net present value Exercise 24-6 Net present value LO P3 a. A new operating system for an existing machine is expected to cost $610,000 and have a useful life of six years. The system yields an incremental after-tax income of $230,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $17,000. b. A machine costs $570,000, has a $30,200 salvage value is expected to last eight years, and will generate an after-tax income of $80,000 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 S1, and EVA of $.1) (Use appropriate foctor(s) from the tables provided.) Complete this question by entering your answers in the tabs below. Required A Required B A machine costs $570,000, has a $30,200 salvage value, is expected to last eight years, and will generate an after-tax Income of $80,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar) Select Chart Amount x PV Factor Cash Flow Annual cash flow Residual value = = = Present Value $ 0 Net present value

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