Question

6) Compute the net present value of each potential investment.Assume the company requires a 12% rate of return on its investments. (FV of $1, PV of $1, FVA of $1and PVA of $1) (Use appropriate factor(s) from the tables provided.) a.A new operating system for an existing machine is expected to cost $770,000 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 $12,400.          b.A machine costs $520,000, has a $23,000 salvage value, is expected to last eight years, and will generate an after-tax income of $84,000 per year after straight-line depreciation. 

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