Compute the net present value of each potential investment

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Question - Assume the company requires a 12% rate of return on its investments. How do you compute the net present value of each potential investment?

A new operating system for an existing machine is expected to cost $660,000 and have a useful life of six years. The system yields an incremental after-tax income of $200,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $13,200.

A machine costs $470,000, has a $23,600 salvage value, is expected to last eight years, and will generate an after-tax income of $90,000 per year after straight-line depreciation.

Reference no: EM132804428

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