CHAPTER 5 PROBLEM Evaluating Alternative Investments. Mendenhall LLC has two independent investment opportunities to purchase production equipment so the company can meet growing customer demand. The first option (equipment A) requires an initial investment of $460,000 for equipment with an expected life of 5 years and a salvage value of $40,000. The second option (equipment B) requires an initial investment of $240,000 for equipment with an expected life of 4 years and a salvage value of $30,000. The company's required rate of return is 10 percent. Additional cash flow information for each investment is provided as follows. Year 1 Year 2 Year 3 Year 4 Year 5 Equipment A Utility savings Additional revenue Maintenance costs Equipment B Utility savings Additional revenue . $ 24,000 $28,000 $30,000 $32,000 $34,000 90,000 96,000 100,000 110,000 120,000 (10,000) (16,000) (20,000) (26,000) (32,000) $ 16,000 $ 18,000 $20,000 $20,000 70,000 72,000 76,000 84,000 Maintenance costs (12,000) (16,000) (18,000) (22,000) Required: a. Calculate the net present value for each investment using the format presented in Figure 2. (Remember to include the initial investment cash outflow and salvage value in your calculation.) Round to the nearest dollar. b. Which, if any, investment is preferable? Explain.