2. Clean Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2019, Clean Chips expects to deliver 700 prototype chips at an average price of $52,000. The plant cannot produce these prototype chips annually in the plant's current condition. To meet future demand, Clean Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,450,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available Modernize Replace 36,800,000 $61,700,000 $7,000,000 17,000,000 Initial Investment in 2019 Terminal Disposal Value in 2025 Useful Life Total annual cash variable costs per chip 7 Years 7 Years 35,500 $ 26,000 Clean Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity we assume no change in prices or costs in future years. The investment will be made at the beginning of 2019, and all transactions thereafter occur on the last day of the year. Clean Chips required rate of return is 10%. Clean Chips has a special waiver on income taxes until 2026. Required 2. Which alternative should Clean Chips choose? 1. Calculate net present value of the modemize and replace altermatives 3. What factors should Clean Chips consider in choosing between the alternatives