A public offering for $400 million is in works for Ashley Inc. Ashley has an out-dated high-capacity printer that needs to be upgraded. This printer slows down the productivity of the workers. The system either can be overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives (Ignore income taxes.):

	Overhaul Present System	Purchase New System
Purchase cost when new	$ 300,000	$ 400,000
Accumulated depreciation	$ 220,000	$ 0
Overhaul costs needed now	$ 250,000	$ 0
Annual cash operating costs	$ 120,000	$ 90,000
Salvage value now	$ 90,000	$ 0
Salvage value in ten years	$ 30,000	$ 80,000
Working capital required	$ 0	$ 50,000

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.

The company uses a 10% discount rate and the total-cost approach to capital budgeting analysis. The working capital required under the new system would be released for use elsewhere at the conclusion of the project. Both alternatives are expected to have a useful life of ten years.

The net present value of the overhaul alternative is closest to:

Multiple Choice

• $(750,300)

• $(975,800)

• $(987,400)

• $(725,800)