Expert Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2021, Expert Chips expects to deliver 540 prototype chips at an average price of $110,000. Expert Chips' marketing vice president forecasts growth of 50 prototype chips per year through 2027. That is, demand will be 540 in 2021, 590 in 2022, 640 in 2023, and so on. i (Click the icon to view additional information.) The following data on the two options are available: (Click the icon to view the data on the two options available and additional information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate the cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021 - 2027 period. First, determine the cash inflows and outflows of the "modernize" alternative over the 2021 to 2027 period. (Use a minus sign or parentheses for a cash outflows. If an input field is not used in the table, leave that input field empty, do not enter a zero.) Units Net cash Initial Proceeds from - Year sold contributions investments sale of equipment More Info Jan 1, 2021 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 The plant cannot produce more than 525 prototype chips annually. To meet future demand, Expert Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can sold for $3,800,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the modernized plant. The old equipment is retained as part of the "modernize" alternative. Dec 31, 2024 Dec 31, 2025 Dec 31, 2026 Dec 31, 2027 Print Done - Data Table 1 Requirements Modernize Initial investment in 2021 $ 33,800,000 $ 7,000,000 $ Replace 64,900,000 16,800,000 1. Calculate the cash inflows and outflows of the "modernize" and "replace" alternatives over the 2021 - 2027 period. 2. Calculate payback period for the "modernize" and "replace" alternatives. 3. Calculate net present value of the "modernize" and "replace" alternatives. 4. What factors should Expert Chips consider in choosing between the alternatives? Terminal disposal value in 2027 $ 7 years Useful life Total annual cash operating cost per prototype chip $ 7 years 84,000 91,500 $ Expert Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2021, and all transactions thereafter occur on the last day of the year. Expert Chips' required rate of return is 6%. There is no difference between the "modernize" and "replace" alternatives in terms of required working capital. Expert Chips has a special waiver on income taxes until 2027. Print Done