Scenario $5\mathrm{.}8$

The Summerville Vitamin Company manufactures bottles of animal$-$shaped chewable vitamins for children. This product line requires two work centers, tablet manufacturing and packaging. The tablet manufacturing work center has a current capacity of $140,000$ bottles per month, and packaging is capable of $100,000$ units per month. This year $($year $0),$ monthly sales of the product line are expected to reach $100,000$ units. Growth per month is projected at an additional $25,000$ units through year $4($i$.$e$.,125,000$ per month in year #$1,150,000$ per month in year #$2,$ etc.$).$ Pre$-$tax profits are expected to be $$5$ per unit throughout the $4-$year planning period. Two alternatives are being considered:

$1)$Expand both tablet manufacturing and packaging at the end of year $0$ to a capacity of $200,000$ units per month, at a total cost for both work centers of $$2,250,000$;

$2)$Expand packaging at the end of year $0$ to $140,000$ units per year, matching tablet manufacturing, at a cost of $$1,200,000,$ then expanding both work centers to $200,000$ units per month at the end of year $2,$ at an additional cost at that time of $$1,400,000.$

Summerville will not consider projects that don't show a $4$th year positive net present value using a discount rate of $25\%.$

Use the information in Scenario $5\mathrm{.}8.$ What action, if any, should Summerville take?

Group of answer choices

Find another option$$neither alternative provides a positive net present value after four years.

Select Alternative #$1.$

Select alternative #$2.$

Either alternative may be selected, since the positive net present values are the same after four years.