Becker Billing Systems, Inc., has an anticipated high capacity printer that needs to be upgraded. The company is faced with two alternatives; the system either can be overhauled or replaced with a new system. The company uses 10% discount rate and 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 projects are expected to have a useful life of ten years. Calculate the net present value and profitability index for each alternative in an excel format. Would you suggest that the company continue with one or the alternatives? Why?

The following data have been gathered concerning the two alternatives (ignore income taxes)

This is all of the informatoon given

Purchase New Overhaul Present System System Purchase cost whe n new $400,000 $ 300,000 Accumulated depreciation $ 220,000 $ Overhaul costs needed now 250,000 $ 90,000 Annual cash operating costs $ 120,000 Salvage value now $ 90,000 Salvage value in ten years $ 30,000 $ 80,000 Working capital required $ 50,000 See separate Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided. + Periods 4 % 7% 9% 10 % 11% 15% 18% 23% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0862 0.855 0.847 0.840 0.833 0.826 0.820 0.81 0.925 0.907 0.890 0.873 O.857 0842 0826 0812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.66 0.889 0864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0o.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.53 0.855 0823 0.792 0.763 0.735 0.708 0683 0.659 0.636 0.613 0.592 0.572 0552 0.534 0.516 0.499 0.482 0.467 0.451 0.43 3 4 6 0.760 0.711 0.665 0.623 0.583 0.547 0513 0482 0452 0425 0400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0270 0247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 10 11 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0257 0.231 0.208 0.1887 0.168 0.152 0.137 0.124 o.112 0.102 0092 0.083 13 14 0555 0481 0.417 0.362 0.315 0275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0095 0084 0074 0.065 0.057 0051 0.0452 0.534 0458 0.394 0.339 0.292 0.252 0218 0.188 0163 0.141 0.123 0.107 0.093 0.081 0.071 0062 O.054 0047 0.042 0.036 17 0.494 0416 0.350 0.296 0.250 0212 0180 0.153 0.130 0.111 0095 0081 0069 0059 0051 0.044 0038 0.032 0028 0.024 20 0.439 0359 0.294 0.242 0.199 0164 0.135 0112 0093 0077 0.064 0053 0.044 0.037 0.031 0.026 0.022 0018 0015 0.013 21 22 0.406 0.326 0.262 0211 0.170 0.138 0.112 0091 0074 0.060 0049 0.040 0.033 0.027 0022 0.018 0.015 0012 0010 0.009 23 0.375 0.295 0233 0 184 0 146 0.116 0092 0074 0059 0047 0038 0030 0024 0.020 0016 0013 0010 0.009 0007 0.006 26 0.333 0255 0.196 0.150 0.116 0090 0.069 0054 0042 0033 0.026 0020 0.016 0.012 0010 0008 0006 0005 0.004 0003 0.321 0243 0.185 0.141 0.107 0082 0.063 0.048 0.037 0029 0.022 0017 0014 0011 0008 0006 0005 0004 0003 0.002 0308 0231 0.174 0131 0.099 0.075 0.057 0.044 0033 0026 0020 0015 0012 0009 0.007 0005 0.004 0003 0003 0002 40 EXHIBIT3-2 Present Value of an Annulty of $1 In Arrears;- (1+ r 5% 7% 8% 14% 15 % 16 % 17 % 18 % 19 % 20 % 21 % 22 % 23 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.8 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.4 3 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.4 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.8C 2 5 6 6.733 6.463 6.210 5.971 5.747 5535 5.335 5.146 4.968 4.799 4.639 4.487 4344 4.207 4.078 3.954 3.837 3.726 3.619 3.51 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.67 10 9.385 8.863 8.384 7.943 7.536 7.161 6814 6.492 6.194 5.918 5.660 5.421 5.197 4.988 4.793 4.611 4439 4.278 4.127 3.985 9.986 9.394 8853 8358 7.904 7 487 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533 4.362 4.203 4.053 13 10.563 9.899 9295 8.745 8244 7.786 7.367 6.982 6628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4.265 4.108 11.652 10.838 10.106 9447 8.851 8313 7.824 7379 6.974 6604 6 265 5.954 5.668 5.405 5.162 4938 4730 4.536 4.357 4.189 17 16 18 13.590 12 462 11.470 10 594 9.818 9.129 8514 7.963 7.469 7.025 6.623 6.259 5.929 5628 5.353 5.101 4.870 4.657 4.460 4.279 14.451 13.163 12.042 11.061 10 201 9.442 8.772 8.176 7.645 7170 6.743 6359 6.011 5.696 5.410 5.149 4.909 4.690 4488 4.302 22 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6.835 6434 6073 5.746 5.451 5.182 4937 4713 4.507 4318 25 26 15.983 14 375 13003 11.826 10 810 9.929 9161 8.488 7896 7372 6.906 6.491 6.118 5.783 5480 5.206 4.956 4.728 4520 43284 27 16 663 14.898 13 406 12.137 11.051 10 116 9 307 8602 7984 7 441 6.961 6534 6.152 5.810 5.502 5.223 4970 4.739 4528 4.335 4 an