A new operating system for an existing machine is expected to cost $600,000 and have a useful life of six years. the system yiel
ds an incremental after-tax income of $155,000 each year after deducting its straight-line depreciation. the predicted salvage value of the system is $16,600. a machine costs $390,000, has a $24,500 salvage value, is expected to last eight years, and will generate an after-tax income of $60,000 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.)
The last-in, first-out (LIFO) inventory method values the cost of goods sold (COGS) using the price of the last purchases made by the company. This valuation method is accepted by the US GAAP and it is generally applied when the replacement costs are continuously increasing.
On the other hand, the IFRS (the international accounting standard) does not allows LIFO, it only accepts FIFO.
