ABC Manufacturing expects to sell 1,025 units of product in 2023 at an average price of $100,000 per unit based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2027. So, the demand will be 1,025 units in 2023 , 1,075 units in 2024 , etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more than 1,000 units annually based on current capacity. In order to meet demand, ABC must either update the current plant or replace it. The old equipment is fully depreciated and can be sold for $4,000,000 if the plant is replaced. If the plant is updated, the costs to update it would be capitalized and depreciated over the useful life of the updated plant. If the plant is updated, then the old equipment would be retained. The following table summarizes the projected data for both options: ABC uses straight-line depreciation, assuming zero terminal disposal value. Assume no changes in prices or costs during future years. The investment will be made at the beginning of 2023 and all cash flows after that are assumed to occur on the last day of each year. ABC 's required rate of return is 8%. Assume an income tax rate of 20%. Proceeds from sales of equipment above book value are taxed at the same 20% rate. Required: Put your alternative calculations for update and for replace on different worksheets to separate them out. 1. Using Excel functions, calculate the net present value (NPV) and the project profitability index (PPI) for the update and replace alternatives. (For the index, you can use either the investments ROI using NPV or present value index: the PV of your net cash flows divided by your investment amount.) 2. Using Excel functions, calculate the internal rate of return (IRR) for both the update and replace alternatives (round to two decimal places). 3. Calculate the payback period for the update and replace alternatives (round to two decimal places) using the non-discounted cash flows. 4. Based on the results, which option should ABC choose? Specifically explain why. Notes: 1. Remember the different types of relevent cash flows from the chapter! 2. Make sure to calculate your annual net cash flow for each year before and after tax and then its present value. 3. Make sure to show your depreciation calculation and the income tax savings from it