Allen College has a telephone system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives:

Allen College uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years.
a. The net present value of the overhaul alternative is:
b. The net present value of the new system alternativeis

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Present Svstem Proposed New Svstem Purchase cost when new Accumulated depreciation Overhaul cost needed now Annual cash operating costs Salvage value now Salvage value in 8 years Working capital required $100,000 90,000 80,000 30,000 10,000 2,000 S150,000 20,000 15,000 50,000