Gilpin Manufacturing, Inc. has a manufacturing machine that needs attention i click the icon to view additional information) Gipin expects the following net cash inflows from the two options: GRID (Click the icon to view Present Value of $1 table.) Click the icon to view Present Value of Ordinary Annuity of $ Click the icon to view Future Value of St table) (Click the icon to view Future Value of Ordinary Annuity of S1 - X Data table Read the requirements More info ity index of nedule for Refurbish Current Purchase New Year Machine Machine Year 1 5 1.260.000 90.000 Year 2 260,000 530.000 Year 220.000 470,000 Year 4 160,000 410,000 Year 5 100.000 350,000 Year 100.000 350.000 Year 7 100,000 350.000 Year 100,000 350.000 Year 350,000 Year 10 350.000 $ 2,340.000 S 3.600.000 Total The company is considering two options. Option 1 is to refurbish the current machine at a cost of $1,300,000, If refurbished, Gilpin 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 $1,800,000. A new machine would last 10 years and have no residual value Print Done 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). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 $ 1,300,000 1 1 2 3 4 5 6 7 (Round your answer to one decimal place.) years The payback for Option 1 (refurbish current machine) is Now complete the payback schedule for Option 2 (purchase) Net Cash Outflows Net Cash Inflows Year Amount invested Annual Accumulated 0 $ 1,800,000 1 The payback for Option 1 (refurbish current machine) is years. Now complete the payback schedule for Option 2 (purchase). Net Cash Outflows Net Cash Inflows Year Amount Invested Annual Accumulated 0 $ 1,800,000 1 2 3 4 5 6 7 8 9 10 (Round your answer to one decimal place.) The payback for Option 2 (purchase new machine) is years Compute the ARR (accounting rate of retur) for each of the options. ARR Defit The payback for Option 2 (purchase new machine) is years. Compute the ARR (accounting rate of retum) for each of the options. ARR % Refurbish Purchase + % 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 Net Cash PV Factor Present Years Inflow (i -16%) Value 1 2 3 4 Present value of each year's inflow: (n = 1) (n=2) (n = 3) (n = 4) (n 5) (n = 6) (n=7) (n 6) Total PV of cash inflows 5 6 7 B 0 Initial investment Not present value of the project Now compute the NPV for Option 2 (purchase). (Enter the factors to three decimal places. X.XXX. Use parentheses or a minus sign for a negative Net Cash PV Factor Present Years Inflow (i = 16%) Value 1 2 3 4 Present value of each year's inflow: (n = 1) (n=2) (n = 3) (n = 4) (n = 5) (n = 6) (n=7) (n=8) (n=9) 5 6 7 TIITTI 8 CD 10 (n = 10) Total PV of cash inflows 0 Initial investment Net present value of the project Title inimo Hosent van or each years now 1 2 (n = 1) on 23 (3) In = 4) 3 4 5 6 (n-6) ins 7 9 10 in ) in = 10) Total PV of cash infos vestment D Nel present value of the project Finally, come the profitablyndex for each option (Round to two decimal XXX) Profitability index shish Purchase Requirement 2 Which option should pin choose? Why? Have your answers in Requirement Cipin whicho because options Wayback period, NARR this ther option W NPV, rois