a. A new operating system for an existing machine is expected to cost $710,000 and have a useful life of six years. The system yields an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $21,000. b. A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax income of $78,000 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.) 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 $710,0000 and have a useful life of six years. The system yields an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $21,000. (Round your answers to the nearest whole dollar.) PV Factor Cash Flow Select Chart Amount Present Value X Annual cash flow Present Value of an Annuity of 1 0 $ Residual value Present Value of 1 Present value of cash inflows Immediate cash outflows Net present value KRequired A Required B A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax income of $78,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) x PV Factor Cash Flow Select Chart Amount Present Value Annual cash flow Residual value 0 0 Net present value Required A Required B
a. A new operating system for an existing machine is expected to cost $710,000 and have a useful life of six years. The system yields an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $21,000. b. A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax income of $78,000 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.) 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 $710,0000 and have a useful life of six years. The system yields an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $21,000. (Round your answers to the nearest whole dollar.) PV Factor Cash Flow Select Chart Amount Present Value X Annual cash flow Present Value of an Annuity of 1 0 $ Residual value Present Value of 1 Present value of cash inflows Immediate cash outflows Net present value KRequired A Required B A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax income of $78,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.) x PV Factor Cash Flow Select Chart Amount Present Value Annual cash flow Residual value 0 0 Net present value Required A Required B
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 13PB: Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and...
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Transcribed Image Text:a. A new operating system for an existing machine is expected to cost $710,000 and have a useful life of six years. The system yields
an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted salvage value of
the system is $21,000.
b. A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax income of
$78,000 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.)
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 $710,0000 and have a useful life of six years. The system
yields an incremental after-tax income of $255,000 each year after deducting its straight-line depreciation. The predicted
salvage value of the system is $21,000. (Round your answers to the nearest whole dollar.)
PV Factor
Cash Flow
Select Chart
Amount
Present Value
X
Annual cash flow Present Value of an Annuity of 1
0
$
Residual value
Present Value of 1
Present value of cash inflows
Immediate cash outflows
Net present value
KRequired A
Required B
Transcribed Image Text:A machine costs $520,000, has a $20,300 salvage value, is expected to last eight years, and will generate an after-tax
income of $78,000 per year after straight-line depreciation. (Round your answers to the nearest whole dollar.)
x PV Factor
Cash Flow
Select Chart
Amount
Present Value
Annual cash flow
Residual value
0
0
Net present value
Required A
Required B
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