Julia Vanfleet is professor of mathematics. She has received a $216,000 inheritance from her father's estate, and she is anxious to invest it between now and the time she retires in 12 years. Professor Vanfleet is considering two alternatives for investing her inheritance.

Alternative 1.Corporate bonds can be purchased that mature in 12 years and that bear interest at 11%. This interest would be taxable and paid annually.

Alternative 2.A small retail business is available for sale that can be purchased for $216,000. The following information relates to this alternative:

a.

Of the purchase price, $82,000 would be for fixtures and other depreciable items. The remainder would be for the company's working capital (inventory, accounts receivable, and cash). The fixtures and other depreciable items would have a remaining useful life of at least 12 years but would be depreciated for tax reporting purposes over eight years using the following allowances published by the Internal Revenue Service:

Year	Percentage of Original Cost Depreciated
1	14.3%
2	24.5
3	17.5
4	12.5
5	8.9
6	8.9
7	8.9
8	4.5
	100.0%

Salvage value is not taken into account when computing depreciation for tax purposes. At any rate, at the end of 12 years these depreciable items would have a negligible salvage value; however, the working capital would be recovered (either through sale or liquidation of the business) for reinvestment elsewhere.

b.	The store building would be leased. At the end of 12 years, if Professor Vanfleet could not find someone to buy the business, it would be necessary to pay $2,300 to the owner of the building to break the lease.
c.	Store records indicate that sales have averaged $859,000 per year, and out-of-pocket costs have averaged $769,000 per year (notincluding income taxes). Management of the store would be entrusted to employees.
d.	Professor Vanfleet's tax rate is 40%.

Required:
(a)	Determine the net present value of alternative 1 using the total-cost approach to net present value in your analysis, and a discount rate of 11%.(Round your answer to the nearest dollar amount.)

(b)	Determine the net present value of alternative 2 using the total-cost approach to net present value in your analysis, and a discount rate of 11%.(Round your answer to the nearest dollar amount.)