Question

A new operating system for an existing machine is expected to cost $570,000 and have a useful life of six years. The system yields an incremental after-tax income of $250,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $12,600. A machine costs $410,000, has a $30,500 salvage value, is expected to last eight years, and will generate an after-tax income of $86,000 per year after straight-line depreciation. Assume the company requires a 10% 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.)

Answer 1

Which of the following items determine your preference for a ticket