Supreme Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Supreme Chips expects to deliver 605 prototype chips at an average price of $110,000. Supreme Chips' marketing vice president forecasts growth of 100 prototype chips per year through 2024. That is, demand will be 605 in 2018, 705 in 2019, 805 in 2020, and so on. (Click the icon to view additional information.) B (Click the icon to view the data on the two options available and additional information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate the cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 period. First, determine the cash inflows and outflows of the modernize alternative over the 2018 to 2024 period. (Use a minus sign or parentheses for a cash outflows. If a box is not used in the table, leave that box empty, do not enter a zero.) Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 Dec 31, 2018 Nan 24 2040 Enter any number in the edit fields and then click Check Answer. x - X More Info Data Table Modernize Replace Initial investment in 2018 $ 37,100,000 $ 66,300,000 The plant cannot produce more than 590 prototype chips annually. To meet future demand, Supreme Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $3,800,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available: Terminal disposal value in 2024 $ 6,600,000 $ 17,300,000 Useful life 7 years 7 years Total annual cash operating cost per prototype chip $ 94,500 $ 84,000 Print Done Supreme 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 2018, and all transactions thereafter occur on the last day of the year. Supreme Chips' required rate of return is 16%. There is no difference between the modernize and replace alternatives in terms of required working capital. Supreme Chips has a special waiver on income taxes until 2024. Jan 1, 2018 Dec 31, 2018 Nor 24 2010 Print Done ter any number in the edit fields and then click Check Answer. A Requirements -X 1. Calculate the cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 period. 2. Calculate payback period for the modernize and replace alternatives. 3. Calculate net present value of the modernize and replace alternatives. 4. What factors should Supreme Chips consider in choosing between the alternatives? Print Done Read the feauirements Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 $ (37,100,000) Dec 31, 2018 605 $ 9,377,500 Dec 31, 2019 705 10,927,500 Dec 31, 2020 805 12,477,500 Dec 31, 2021 905 14,027,500 Dec 31, 2022 1,005 15,577,500 Dec 31, 2023 1,105 17,127,500 Dec 31, 2024 1,205 18,677,500 6,600,000 Next, determine the cash inflows and outflows of the replace alternative over the 2018 to 2024 period. (Use a minus sig Year Next, determine the cash inflows and outflows of the replace alternative over the 2018 to 2024 period. (Use a minus Units Net cash Initial Proceeds from sold contributions investments sale of equipment Jan 1, 2018 $ (66,300,000) $ 3,800,000 Dec 31, 2018 605 $ 15,730,000 Dec 31, 2019 705 18,330,000 Dec 31, 2020 805 20,930,000 Dec 31, 2021 23,530,000 Dec 31, 2022 1,005 26,130,000 Dec 31, 2023 1,105 28,730,000 Dec 31, 2024 1,205 31,330,000 17,300,000 Requirement 2. Calculate payback period for the modernize and replace alternatives. (Round your answers to two Enter any number in the edit fields and then click Check Answer. 905 Supreme Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Supreme Chips expects to deliver 605 prototype chips at an average price of $110,000. Supreme Chips' marketing vice president forecasts growth of 100 prototype chips per year through 2024. That is, demand will be 605 in 2018, 705 in 2019, 805 in 2020, and so on. (Click the icon to view additional information.) B (Click the icon to view the data on the two options available and additional information.) Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 table Read the requirements. Requirement 1. Calculate the cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 period. First, determine the cash inflows and outflows of the modernize alternative over the 2018 to 2024 period. (Use a minus sign or parentheses for a cash outflows. If a box is not used in the table, leave that box empty, do not enter a zero.) Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 Dec 31, 2018 Nan 24 2040 Enter any number in the edit fields and then click Check Answer. x - X More Info Data Table Modernize Replace Initial investment in 2018 $ 37,100,000 $ 66,300,000 The plant cannot produce more than 590 prototype chips annually. To meet future demand, Supreme Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $3,800,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. The following data on the two options are available: Terminal disposal value in 2024 $ 6,600,000 $ 17,300,000 Useful life 7 years 7 years Total annual cash operating cost per prototype chip $ 94,500 $ 84,000 Print Done Supreme 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 2018, and all transactions thereafter occur on the last day of the year. Supreme Chips' required rate of return is 16%. There is no difference between the modernize and replace alternatives in terms of required working capital. Supreme Chips has a special waiver on income taxes until 2024. Jan 1, 2018 Dec 31, 2018 Nor 24 2010 Print Done ter any number in the edit fields and then click Check Answer. A Requirements -X 1. Calculate the cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 period. 2. Calculate payback period for the modernize and replace alternatives. 3. Calculate net present value of the modernize and replace alternatives. 4. What factors should Supreme Chips consider in choosing between the alternatives? Print Done Read the feauirements Units Net cash Initial Proceeds from Year sold contributions investments sale of equipment Jan 1, 2018 $ (37,100,000) Dec 31, 2018 605 $ 9,377,500 Dec 31, 2019 705 10,927,500 Dec 31, 2020 805 12,477,500 Dec 31, 2021 905 14,027,500 Dec 31, 2022 1,005 15,577,500 Dec 31, 2023 1,105 17,127,500 Dec 31, 2024 1,205 18,677,500 6,600,000 Next, determine the cash inflows and outflows of the replace alternative over the 2018 to 2024 period. (Use a minus sig Year Next, determine the cash inflows and outflows of the replace alternative over the 2018 to 2024 period. (Use a minus Units Net cash Initial Proceeds from sold contributions investments sale of equipment Jan 1, 2018 $ (66,300,000) $ 3,800,000 Dec 31, 2018 605 $ 15,730,000 Dec 31, 2019 705 18,330,000 Dec 31, 2020 805 20,930,000 Dec 31, 2021 23,530,000 Dec 31, 2022 1,005 26,130,000 Dec 31, 2023 1,105 28,730,000 Dec 31, 2024 1,205 31,330,000 17,300,000 Requirement 2. Calculate payback period for the modernize and replace alternatives. (Round your answers to two Enter any number in the edit fields and then click Check Answer. 905