Problem 24-6A (Algo) Net present value of alternate investments LO P3 Interstate Manufacturing is considering either overhauing an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 12\% rate of return on its investments. (PV of \$1. FV of \$1. PVA of \$1, and EVA of S1) (Use oppropriate factor(s) from the tables provided.) Alternative t: Keep the old machine and have it overhauled. This requires an initial investment of $150,000 and results in $60,000 of net cash flows in each of the next five years. After five years, it can be sold for a $10,000 salvage value Alternative 2: Sell the oid machine for $50,000 and buy a new one. The new machine requires an intial investment of $290,000 and can be sold for a $10,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $60,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2 3. Which altemative should management select based on net present value? Complete this question by entering your answers in the tabs below. Determine the net present value of alternative 1. (Do not round intermedate calculations. Round vour present, value factor to 4 decimals and final answers to the nearest whole dellar,) Problem 24-6A (Algo) Net present value of alternate investments LO P3 Interstate Manufacturing is considering ether overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 12\% rate of return on its investments. (PV of S1. FV of S1. PVA of S1, and EVA of S1) (Use oppropriote factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $150,000 and results in $60,000 of net cash flows in each of the next five years. After five years, it can be sold for a $10,000 salvage value Alternative 2: Sell the old machine for $50,000 and buy a new one. The new machine requires an initial investment of $290,000 and can be sold for a $10,000 salvage value in five years. It would yield cost savings and higher saies, resulting in net cash flows of $60,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1 2. Determine the net present value of altemative 2. 3. Which alternative should management select based on net present value? Complete this question by entering your answers in the tobs below. Determine the net present value of alternative 2. (Negative not present values should b. incicated with a minus .iph. Oo not round intermediate calculations, Round your present value factor to 4 decimals and final answern to the fiearest whole. dollar.) Problem 24-6A (Algo) Net present value of alternate investments LO P3 Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 12\% rate of return on its investments. (PV of \$1. FV of \$1. PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $150,000 and results in $60,000 of net cash flows in each of the next five years. After five years, it can be sold for a $10,000 salvage value. Alternative 2: Sell the old machine for $50,000 and buy a new one. The new machine requires an initial investment of $290,000 and can be sold for a $10,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $60,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2 3. Which alternative should management select based on net present value? Complete this question by entering your answers in the tabs below. Which alternative should management select based on net present value
