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Compute the net present value of each potential investment

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Question - A new operating system for an existing machine is expected to cost $792,000 and have a useful life of six years. The system yields an incremental after-tax income of $210,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $24,000.

A machine costs $500,000, has a $31,100 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.

Reference no: EM132749606

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