Your company has designed a new electronic control device that dynamically reduces the power consumption of an industrial electric vehicle by up to 20 percent. Demand is likely to be relatively low in its first year on the market; however, with expectations that the cost of energy will rise for the foreseeable future, demand is expected to rise in successive years. The new device will be sold for $750 with the understanding that no price increase can occur for at least five years. Forecasted annual demand for the next five years is shown in the following table:

YearDemand (units/year)

(1)1,000

(2)1,250

(3)3,500

(4)10,000

(5)15,000

Alternative 1:Produce the device in-house which will require an initial outlay of $400,000 for plant and equipment and a variable cost per unit of $75. Alternative 2:Outsource production. This requires no initial investment, but will cost your company $250 per unit.

For each of the alternatives above, calculate the net present value. Round/Report to the nearest cent. Do not include commas or the dollar sign (e.g., 5109.54). Over the next five years, which alternative maximizes the NPV of this project if the discount rate is 8 percent? (Type 1 for Alternative 1 and 2 for Alternative 2).