A. A new operating system for an existing machine is expected to cost $684,000 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 $60,000.
b. A machine costs $480,000, has a $40,000 salvage value, is expected to last eight years, and will generate an after-tax income of $110,000 per year after straight-line depreciation.
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