National Chips is a manufacturer of prototype chips based in Buffalo, New York. (Click the icon to view the prototype chips information.) B (Click the icon to view information on the opti Present Value of $1 table Present Value of Annuity of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity Read the requirements, Next year, in 2021, National Chips expects to deliver 605 prototype chips at an average price of $90,000. National Chips' marketing vice president forecasts growth of 45 prototype chips per year through 2027. That is, demand will be 605 in 2021, 650 in 2022, 695 in 2023, and so on. The plant cannot produce more than 595 prototype chips annually. To meet future demand, National Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,700,000 if the plant is replaced. If the plant is modernized, the costs to modemize it are to be capitalized and depreciated over the useful life of the modemized plant. The old equipment is retained as part of the "modernize" alternative. Requirements 1 and 2. Calculate the after-tax cash inflows and outflows of the "modernize" and "replace alternative Let's begin with the "modernize" alternative, Start by computing the present value of the after-tax cash flows from ope terminal disposal value, and finally, determine the total net present value (NPV) of the investment for the "modernize Use a minus sign or parentheses for a negative present value of net cash flows.) Net Cash Present Data Table PV factor Inflow of Cash X X Net initial investment After-tax cash flows from operations: Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 Dec 31, 2025 Dec 31, 2026 Dec 31, 2027 X = X The following data on the two options are available: Modernize Replace Initial investment in 2021 S 34,800,000 $ 61,700,000 Terminal disposal value in 2027 S 7,400,000 $ 14,500,000 Useful life 7 years 7 years Total annual cash operating cost per prototype chips 74,000 $ 64,000 National Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2021, and all transactions thereafter occur on the last day of the year. National Chips' required rate of retum is 10%. There is no difference between the "modernize" and "replace" alternatives in terms of required working capital. National Chips pays a 45% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the same 45% rate. = = Enter any number in the edit fields and then click Check