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Alton expects the following net cash inflows from the two options:

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Alton uses straight$-$line depreciation and requires an annual return of $10\%.$

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Requirement $1.$ Compute the payback, the ARR, the NPV$,$ and the profitability index of these two options.

Compute the payback for both options. Begin by completing the payback schedule for Option $1($refurbish$).$

$($Round your answer to one decimal place.$)$

More info

The company is considering two options. Option $1$ is to refurbish the current

machine at a cost of $$2,600,000.$ If refurbished, Alton expects the machine to last

another eight years and then have no residual value. Option $2$ is to replace the

machine at a cost of $$3,600,000.$ A new machine would last $10$ years and have no

residual value.

The payback for Option $1($refurbish current machine$)$ is

years.

Now complete the payback schedule for Option $2($purchase$).$

Data table

$($Round your answer to one decimal place.$)$

The payback for Option $2($purchase new machine$)$ is years.

Compute the ARR $($accounting rate of return$)$ for each of the options.

Compute the NPV for each of the options. Begin with Option $1($refurbish$).($Enter the factors to three decimal places.

X$.$XXX$.$ Use parentheses or a minus sign for a negative net present value.$)$