The Diamond Company is a national mattress manufacturer. Its Present Value of $1 table Marion plant will become idle on December 31, 2020. Nina Simon, the Present Value of Annuity of $1 table corporate controller, has been asked to look at three options regarding Future Value of $1 table the plant: Euture Value of Annulty of $1 table (Click the icon to view the options.) Read the roguirements. Diamond Company treats all cash flows as if they occur at the end of the year, and uses an after-tax required rate of return of 12%. Diamond is subject to a 30% tax rate on all income, including capital gains. More info Option 1: The plant can be leased to the Coil Corporation, one of Diamond's suppliers, for 3 years. Under the lease terms, Coil would pay Diamond $225,000 rent per year (payable at year-end) and would grant Diamond a $57,000 annual discount from the normal price of coils purchased by Diamond. (Assume that the discount is received at year-end for each of the 3 years.) Coil would bear all of the plant's ownership costs. Diamond expects to sell this plant for $290,000 at the end of the 3-year lease. Option 2: The plant could be used for 3 years to make mattress covers as an accessory to be sold with a mattress. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be $24,000 annually for the 3-year period (assume the fixed costs occur at year-end). The covers are expected to sell for $24 each and variable cost per unit is expected to be $12. The following production and sales of the mattress covers are expected: 2021,28,000 units; 2022, 22,000 units; 2023,28,000 units. In order to manufacture the mattrace anvare enma of the nlant anuinmant wauld noad th ha More info Uptioi 2. IIte prairi couiu ve useu tol o years to make matiress cuvers as all accessory to be sold with a mattress. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be $24,000 annually for the 3-year period (assume the fixed costs occur at year-end). The covers are expected to sell for $24 each and variable cost per unit is expected to be $12. The following production and sales of the mattress covers are expected: 2021, 28,000 units; 2022,22,000 units; 2023,28,000 units. In order to manufacture the mattress covers, some of the plant equipment would need to be upgraded at an immediate cost of $100,000. The equipment would be depreciated using the straight-line depreciation method and zero terminal disposal value over the 3 years it would be in use. Because of the equipment upgrades, Diamond could sell the plant for $320,000 at the end of 3 years. No change in working capital would be required. Option 3: The plant, which has been fully depreciated for tax purposes, can be sold immediately for $830,000. Requirements 1. Calculate net present value of each of the options and determine which option Diamond should select using the NPV criterion. 2. What nonfinancial factors should Diamond consider before making its choice? Requirement 1. Calculate net present value of each of the options and determine which option Diamond should select using the NPV criterion. Begin the calculation of Option 1 by determining the after-tax cash inflow for rent. Then, determine the after-tax cash inflow for the material purchases discount. Finally, determine the after-tax cash inflow on sale of the plant and the total net present value (NPV) of Option 1 . (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) the investment rounded to the nearest whole dollar.) The Diamond Company is a national mattress manufacturer. Its Present Value of $1 table Marion plant will become idle on December 31, 2020. Nina Simon, the Present Value of Annuity of $1 table corporate controller, has been asked to look at three options regarding Future Value of $1 table the plant: Future Value of Annuity of $1 table (Click the icon to view the options.) Diamond Company treats all cash flows as if they occur at the end of the year, and uses an after-tax required rate of return of 12%. Diamond is subject to a 30% tax rate on all income, including capital gains. More info Option 1: The plant can be leased to the Coil Corporation, one of Diamond's suppliers, for 3 years. Under the lease terms, Coil would pay Diamond $225,000 rent per year (payable at year-end) and would grant Diamond a $57,000 annual discount from the normal price of coils purchased by Diamond. (Assume that the discount is received at year-end for each of the 3 years.) Coil would bear all of the plant's ownership costs. Diamond expects to sell this plant for $290,000 at the end of the 3-year lease. Option 2: The plant could be used for 3 years to make mattress covers as an accessory to be sold with a mattress. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be $24,000 annually for the 3 -year period (assume the fixed costs occur at year-end). The covers are expected to sell for $24 each and variable cost per unit is expected to be $12. The following production and sales of the mattress covers are expected: 2021,28,000 units; 2022,22,000 units; 2023,28,000 units. In order to manufacture the mattrace anuare enma af tha nlant a iuinmant wald nand th ha More info accessory to be sold with a mattress. Fixed overhead costs (a cash outflow) before any equipment upgrades are estimated to be $24,000 annually for the 3-year period (assume the fixed costs occur at year-end). The covers are expected to sell for $24 each and variable cost per unit is expected to be $12. The following production and sales of the mattress covers are expected: 2021,28,000 units; 2022,22,000 units; 2023, 28,000 units. In order to manufacture the mattress covers, some of the plant equipment would need to be upgraded at an immediate cost of $100,000. The equipment would be depreciated using the straight-line depreciation method and zero terminal disposal value over the 3 years it would be in use. Because of the equipment upgrades, Diamond could sell the plant for $320,000 at the end of 3 years. No change in working capital would be required. Option 3: The plant, which has been fully depreciated for tax purposes, can be sold immediately for $830,000. Requirements 1. Calculate net present value of each of the options and determine which option Diamond should select using the NPV criterion. 2. What nonfinancial factors should Diamond consider before making its choice? Requirement 1. Calculate net present value of each of the options and determine which option Diamond should select using the NPV criterion. Begin the calculation of Option 1 by determining the after-tax cash inflow for rent. Then, determine the after-tax cash inffow for the material purchases discount. Finally, determine the after-tax cash inflow on sale of the plant and the total net present value (NPV) of Option 1 . (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) Presentvalueofnetcashflows,Option1:NetCashPVfactorPresentValueInflow After-tax cash inflows from rent: Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Reference Reference Reference Raferanca Reference Reference Reference Reference