Interstate Manufacturing is considering elther overhauling an old machine or replacing it with a new machine. Information about the two alternatives 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 initial investment of $$155,000$ and results in $$40,000$ 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 $$30,000$ and buy a new one. The new machine requires an initial investment of $$305,000$ and can be sold for a $$20,000$ salvage value in five years. It would yleld cost savings and higher sales, resulting in net cash flows of $$60,000$ in each of the next five years.

Required:

Determine the net present value of alternative $1.$

Determine the net present value of alternative $2.$

Which alternative should management select based on net present value?

Complete this question by entering your answers in the tabs below.

Required $1$

Required $2$

Required $3$

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 dollar.$)$

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