1. Atlantic Second Choice Company is planning on expanding capabilities to meet the growing demand for its products. The first alternative is to expand its current manufacturing facility, which is located next to a vacant lot in the heart of the city. The second alternative is to convert a warehouse the company owns. The plant and equipment investment to expand the current manufacturing facility is $19 million, while a $22-million investment is required to convert the warehouse. Working capital of $3 million is required if current manufacturing facility is expanded and $4 million is required for conversion of the warehouse. The expanded manufacturing capacity will produce 1,000,000 units. The converted warehouse capacity would be 1,150,000. Units would be sold for $15 per unit and variable cost is $8 per unit if produced in the current facility and $7 per unit if produced n the converted warehouse. Expanding the current facility will increase efficiency resulting in annual cash operating costs of $.8 million. If the warehouse is converted annual cash operating costs will be $.65 million. Operations in the expanded will starting in year 5 incur additional maintenance of $120,000 the beginning of each year. For the converted ware house additional maintenance cost will be $50,000(Y5), $75,000(Y6), $95,000(Y7), $125,000(Y8), $130,000 (Y9), and $140,000(Y10). The expected disposal of each facility at the end of 10 years is 1% of the original cost. CCA rate for each is 20%. Expansion The company uses a 15% required rate of return and tax rate is 40%. Required: Compute net present value of each alternative and make recommendation to Atlantic Second Choice