The management of a companyis considering replacing a number of old looms in the mill's weave room.The looms to be replaced are two 220-cm President looms, sixteen 135-cm President looms, and twenty-two 185-cm Draper X-P2 looms. The company may either replace the old looms with new ones of the same kind or buy 21 new shutterless Pignone looms. The first alternative requires the purchase of 40 new President and Draper looms and the scrapping of the old looms. The second alternative involves scrapping the 40 old looms, relocating 12 Picanol looms, and constructing a concrete floor, plus purchasing the 21 Pignone looms and various related equipment. Following are the revenue and expense predictions:

Alternative 1 Alternative 2 Machinery/related equipment $2,475,000 $1,100,000 $2.400.ooo $1,700,000 Annual 0&M cost $1,000,000 $830,000 Project life 8 yea rs 8 yea rs Salvage value $160,000 $70,000 \f