Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsas cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsas controller:

E11-11 Using NPV to Evaluate Mutually Exclusive Projects CLO 11-5] Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Option A Option B Initial investment 320,000 454,000 Annual cash inflows 150,000 160,000 Annual cash outflows 70,000 75,000 Costs to rebuild 20,000 Salvage value 24,000 8 years 8 years Estimated useful life Required: Calculate NPV. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of S1. Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) Option A: Year Cash Flows PV factory Present Value Initial investment o 1.8 Annual Cash Flows 4 Cost to Rebuild 8 Salvage Net Present Value option B: Year Cash Flows PV factory Present Value 11% o Initial Investment 1.8 Annual Cash Flows Cost to Rebuild 4 8 Salvage Net Present Value E11-11 Using NPV to Evaluate Mutually Exclusive Projects CLO 11-5] Tulsa Company is considering investing in new bottling equipment and has two options: Option A has a lower initial cost but would require a significant expenditure to rebuild the machine after four years; Option B has higher maintenance costs, but also has a higher salvage value at the end of its useful life. Tulsa's cost of capital is 11 percent. The following estimates of the cash flows were developed by Tulsa's controller: Option A Option B Initial investment 320,000 454,000 Annual cash inflows 150,000 160,000 Annual cash outflows 70,000 75,000 Costs to rebuild 20,000 Salvage value 24,000 8 years 8 years Estimated useful life Required: Calculate NPV. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of S1. Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your "Present Values" to the nearest whole dollar amount.) Option A: Year Cash Flows PV factory Present Value Initial investment o 1.8 Annual Cash Flows 4 Cost to Rebuild 8 Salvage Net Present Value option B: Year Cash Flows PV factory Present Value 11% o Initial Investment 1.8 Annual Cash Flows Cost to Rebuild 4 8 Salvage Net Present Value