Net Present Value and Competing Alternatives Follow the format shown in Exhibit 128-1 and Exhibit 128-2 as you complete the requirements below. Stillwater Designs has been rebuilding Model 100, Model 120, and Model 150 Kicker subwoofers that were returned for warranty action. Customers returni the subwoofers receive a new replacement. The warranty returns are then rebuilt and resold (as seconds). Tent sales are often used to sell the rebuilt speakers. As part of the rebuilding process, the speakers are demagnetized so that metal pieces and shavings can be removed. A demagnetizing (demag) machine is used to achieve this objective. A product design change has made the most recent Model 150 speakers too tall for the demag machine. They ng longer fit in the demag machine. Stillwater Designs is currently considering two alternatives. First, a new demag machine can be bought that has a different design, eliminating the fit proble The cost of this machine is $500,000, and it will last 5 years. Second, Stillwater can keep the current machine and sell the 150 speakers for scrap, using the old demag machine for the Model 100 and 120 speakers only. A rebuilt speaker sells for $295 and costs $274.65 to rebuild (for materials, labor, and overhe cash outlays). The $274.65 outlay includes the annual operating cash effects of the new demag machine. If not rebuilt, the Model 150 speakers can be sold for $4 each as scrap. There are 10,000 Model 150 warranty returns per year. Assume that the required rate of return is 10% Required: 1. Determine which alternative is the best for Stillwater Designs by using NPV analysis. If required, round to the nearest dollar NPV (rebuild alternative) NPV (scrap alternative) Rebuild alternative 2. CONCEPTUAL CONNECTION: Determine which alternative is best for Stilwater Designs by using an TRR analysis. Enter as a percent. Round your answers to the nearest whole percent. If IRR is infinite, leave the cell blank Calculator longer fit in the demag machine. Stillwater Designs is currently considering two alternatives. First, a new demag machine can be bought that has a different design, eliminating the fit problem. The cost of this machine is $600,000, and it will last 5 years. Second, Stillwater can keep the current machine and sell the 150 speakers for scrap, using the old demag machine for the Model 100 and 120 speakers only. A rebuilt speaker sells for $295 and costs $274.65 to rebuild (for materials, labor, and overhead cash outlays). The $274.65 outlay includes the annual operating cash effects of the new demag machine. If not rebuilt, the Model 150 speakers can be sold for $4 each as scrap. There are 10,000 Model 150 warranty returns per year. Assume that the required rate of return is 10% Required: 1. Determine which alternative is the best for Stillwater Designs by using NPV analysis. If required, round to the nearest dollar NPV (rebuild alternative) NPV (scrap alternative) Rebuild alternative 2. CONCEPTUAL CONNECTION: Determine which alternative is best for Stillwater Designs by using an IRR analysis. Enter as a percent. Round your answers to the nearest whole percent. IY IRR is infinite leave the cell blank. TRR (rebuild alternative) IRR (scrap alternative) Scrap alternative Why is NPV analysis a better approach? It measures the absolute Improvement in dollars Exhibit 123.1 Present Value of a Single Amount 355 2 64 7 8 % 9% 10% 19 12% 14% 16% 18% 20% 25% 30% 1 0.99010 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.16207 0.84746 0.83333 0.80000 0.76923 2 0.98030 0.96117 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.79719 0.76947 0.74316 0.71818 0.69444 0.64000 0.59172 30.97059 0.94232 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 0.77218 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870 0.51200 0.45517 4 0.96098 0.92385 0.88849 0.65480 0.82270 0.79209 0.76290 073503 0.70843 0.68301 0.63552 0.59208 0.55229 0.51579 0.48225 0.40960 0.35013 $ 0.95147 0.00573 0.86261 0.82193 0.78353 07426 0.71299 0.68058 0.64993 0.62092 0.56743 0.51937 0.47611 0.43711 0.40168 0.32768 0.26933 6 0.04205 0.88797 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490 0.26214 0.20718 7 0.93272 0.87056 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51316 0.45235 0.19964 0.35383 0.31393 0.27908 0.20972 0.15937 8 0.92348 0.85349 078941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.40388 0.35056 0.10503 0.26604 0.23257 0.16777 0.12259 9 0.91434 083676 0.76642 0.70259 064461 0.59190 0.54393 0.50025 0.46043 0.42410 0.36061 0.10751 0.26295 0.22546 0.19381 0.13422 0.09430 10 0.90529 0.32015 0.74409 0.67556 0.61391 0.558.19 0.50835 0.46319 0.42241 0.18554 0.32197 0.26974 0.22668 0.19106 0.16151 0.10737 0.07254 11 0.89632 0.80426 0.72242 0.64958 0.58468 0.52679 0.47500 0.42888 0.38753 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459 0.08590 0.05580 12 0.88745 0.78849 0.70138 0.62460 0.55684 0.49607 0.44401 0.39711 0.35553 0.3186) 0.25668 0.20756 0.16846 0.13722 0.11216 0.06872 0.04292 13 087866 0.77101 0.68095 0.60057 0.53032 046834 0.41406 0.36770 0.32618 0.28966 0.22917 0.18207 0.14523 0.11629 0.09346 0.05498 0.03302 14 0.86996 0.75788 066112 0.57748 SOS07 0.44230 0.38782 0.34046 0.29925 0.26333 0.20462 0.15971 0.12520 0.09855 0.07789 0.04398 0.02540 15 0.86135 0.74301 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.18270 0.14010 0.10793 0.08352 0.06491 0.03518 0.01954 16 0.85282 0.72845 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 0.25187 0.2176) 0.16312 0.12289 0,09304 0.07078 0.05409 0.02815 0.01 503 17 0.54038 0.71416 0.60502 051337 0.43630 0.37136 0.31657 0.27027 023107 0.19784 0.14564 0.10780 0.08021 005098 0.04507 0.02252 0.01156 18 0.8.3602 070016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.21199 0.17986 0.13004 0.09456 0.06914 0.05083 0.03756 0.01801 0.00889 19 0.82774 0.58643 0.57029 0.47464 0.39573 033051 0.27651 0.23171 0.19449 0.16351 0.11611 0.08295 0.05139 0.04308 0.03130 0.01441 0.00684 20 0.81954 0.67297 0.55368 0.45639 0.37689 0.31180 0.25842 0.21455 0.17843 0.14864 0.10367 0.07276 0.05139 0.03651 0.02608 0.01153 0.00526 21 0.81143 0.65978 0.53755 0.43883 0.15894 0.29416 0.24151 0.19866 0.16170 0.11513 0.09256 0.06383 0.04430 0.03094 0.02174 0.00022 0.00405 22 0.80340 0.54684 052189 0.42196 034185 0.27751 0.22571 0.18394 015018 0.12285 0.08264 0.05599 001819 0.02622 0.01811 0.00738 0.00311 22 0.79544 0.61416 0.50660 0.40573 0.12557 0.26180 0.21095 0.17032 0.11778 0.11168 0.07379 0.04911 0.01292 0.02222 0.01509 0.00590 0.00239 24 078757 0.62172 0.49193 0.39012 0.31007 0.24698 0.19715 0.15770 0.12640 0.10153 0.06588 0.04308 0.02838 0.01883 0.01258 0.00472 0.00184 25 0.77977 0.60953 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 0.11597 0.09230 0.05882 0.03779 0.02447 0.01596 0.01048 0.00378 0.00142 26 0.77205 0_50758 0.46360 0.36069 0.28124 0.21981 0.17220 0.13520 0.10639 0.08791 0.05252 0.03315 0.02109 0.01352 0.00874 0.00302 0.00109 27 076440 0.58586 0.45019 0.34682 0.26785 0.20717 0.16093 0.12519 0.09761 0.07628 0.04689 0.02908 0.01818 0.01146 0.00728 0.00242 0.00084 28 0.75684 0.57417 0.43708 0.33348 0.25509 0.19563 0.15040 0.11591 0.08955 0.06934 0.04187 0.02551 0.01567 0.00971 0.00607 0.00193 0.00065 29 0.74934 0.56311 0.42435 0.32065 0.24295 0.15456 0.14056 0.10733 0.08215 0.06304 0.03738 002237 0.01351 0.00823 0.00506 0.00155 0.00050 30 0.74192 0.55207 0.41190 0.30832 0.23138 0.17411 0.13117 0.09938 0.07537 0.05731 0.03338 0.01963 0.01165 0.00697 0.00421 0.00124 000038 *. - A + 28 0.75684 0.5 29 0.74934 0.50 30 0.74192 0.5 *P. = A/(1+ 2 23559b 20090 0 28 24.31644 21.2812718- 29 2506579 21.84438 19. 30 25.807712239646 19 * P =( 1{ ) [1 - 1 / (1 + f]