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Interstate Manufacturing is considering elther overhauling an old machine or replacing it with a new machine. Information about the two altematlves follows. Management requires a
Interstate Manufacturing is considering elther overhauling an old machine or replacing it with a new machine. Information about the two altematlves follows. Management requires a 10% rate of return on its investments. (PV of $1, FV of $1. PVA of $1, and FVA of $1 ) (Use approprlate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initlal investment of $142,000 and results in $39,000 of net cash flows in each of the next five years. After five years, It can be sold for a $20,000 salvage value. Alternative 2: Sell the old machine for $45,000 and buy a new one. The new machine requires an initial investment of $308,000 and can be sold for a $6,000 salvage value in five years. It would yeld cost savings and higher sales, resulting in net cash flows of $55,000 in each of the next five years. Determine the net present value of alternative 1 . Determine the net present value of alternative 2 . Which alternatve should management select based on net present value? Determine the net present value of alternative 1. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollari) Determine the net present value of alternative 2 . (Negative net present values should be indicated with a minus sign. Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole doilar) Which alternative should management select based on net present value
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