Eastbay Hospital has an auxiliary generator that is used when power failures occur. The generator is worn out and must be either overhauled or replaced with a new generator. The hospital has assembled the following information: Purchase cost new Remaining book value Overhaul needed now Annual cash operating costs Salvage value-now Salvage value-six years from now Present New Generator Generator $28,000 $34,000 $ 21,000 $20,000 $ 17,500 $ 12,500 $ 16,000 $15,000 $30,000 If the company keeps and overhauls its present generator, then the generator will be usable for six more years. If a new generator is purchased, it will be used for six years, after which it will be replaced. The new generator would be diesel-powered, resulting in a substantial reduction in annual operating costs, as shown above. The hospital computes depreciation on a straight-line basis. All equipment purchases are evaluated using a 6% discount rate. (Ignore income taxes.) Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using tables. Required: 1a. Determine the net present value using the total-cost approach. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places and intermediate calculations to nearest dollar amount.) Item Year(s) Amount of Cash Flows ctor Present Value of Cash Flows Purchase the new generator: Cost of the new generator Now Salvage of the old generator Now Annual cash operating costs 1-6 Salvage of the new generator Present value of the net cash outflows Keep the old generator: Overhaul needed now Now Annual cash operating costs 1-6 Salvage of the old generator Present value of the net cash outflows Difference between the net present values of both alternatives 1b. Should Eastbay Hospital keep the old generator or purchase the new one? O Keep the old generator O Purchase the new generator 2. Using the incremental approach, determine the net present value in favor (or against) purchasing the new generator. (Round discount factor(s) to 3 decimal places.) Item Year(s) Amount of Cash Flows 6% Factor Present Value of Cash Flows Now Now Incremental investment-new generator Salvage of the old generator Savings in annual cash operating costs Difference in salvage value in 6 years 1-6 6 Difference between the net present values of both alternatives