is Question Help (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Hughes Manufacturing, Inc. has a manufacturing machine that needs attention. (Click the icon to view additional information.) Hughes expects the following net cash inflows from the two options: (Click the icon to view the net cash flows.) Hughes uses straight-line depreciation and requires an annual return of 10%. (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. 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 Amount Invested 2,600,000 Net Cash Inflows Annual Accumulated Year Choose from any list or enter any number in the input fields and then continue to the next question. The payback for Option 1 (refurbish current machine) is years. Now complete the payback schedule for Option 2 (purchase). Net Cash Outflows Amount Invested 3,800,000 Net Cash Inflows Annual Accumulated Year Choose from any list or enter any number in the input fields and then continue to the next question. (Round your answer to one decimal place.) The payback for Option 2 (purchase new machine) is years. Compute the ARR (accounting rate of return) 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 sig Net Cash Inflow PV Factor (i = 10%) Present Value Years Present value of each year's inflow: Net Cash Present PV Factor (i = 10%) Years Inflow Value 2 3 4 5 6 7 8 Present value of each year's inflow: (n = 1) (n=2) (n = 3) (n = 4) (n = 5) (n = 6) (n = 7) (n = 8) Total PV of cash inflows 0 Initial investment Te present value or we 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 present value.) Net Cash Inflow PV Factor (i = 10%) Present Value Years Present value of each year's inflow: (n = 1) (n=2) 3 (n = 3) 4 5 6 7 (n = 4) (n = 5) (n = 6) (n=7) in = Choose from any list or enter any number in the input fields and then continue to the next question. Total PV of cash inflows 0 Initial investment Net present value of the project Finally, compute the profitability index for each option. (Round to two decimal places X.XX.) = Profitability index Refurbish Purchase Requirement 2. Which option should Hughes choose? Why? Review your answers in Requirement 1. Hughes should choose profitability index is because this option has a payback period, an ARR that is the other option, a NPV, and its A More Info (Click the icon to view Present Value of $1 table.) Click the icon to view Present Value of Ordinary Annuity The company is considering two options. Option 1 is to refurbish the current machine at a cost of $2,600,000. If refurbished, Hughes 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 $3,800,000. A new machine would last 10 years and have no residual value. (Click the icon to view Future Value of $1 table.) bnuity of A - X Data Table Print Done Year 0 Initial investment Net present value of the project 1 Finally, compute the profitability index for each option. (Round to two decimal places X.XX.) Refurbish Current Purchase New Machine Machine $ 1,760,000 $ 2,970,000 440,000 490,000 360,000 410,000 280,000 330,000 200,000 250,000 Refurbish Purchase 200,000 200,000 Requirement 2. Which option should Hughes choose? Why? Review your answers in Requirement 1. Hughes should choose profitability index is 250,000 250,000 250,000 200,000 because this option has a pption, a 250,000 250,000 3,640,000 $ 5,700,000 Total Choose from any list or enter any number in the input fields and then continue to the Print Done