Burdell Labs is a diagnostic laboratory that does various tests $($blood tests, urine tests, etc.$)$ for doctors' offices in the Indianapolis area. Test specimens are picked up at the doctors' offices and are transported to the testing facility, with uniform arrivals throughout the day. All tests go through two testing centers in the testing facility, Test Center A and Test Center B$.$ A has a current capacity of $1,000$ units per$$week$,$ and B is capable of $1,500$ units per$$week$.$ The facility operates $50$ weeks per year. This year $($year $0),$ test volumes are expected to reach $1,000$ units per$$week$.$ Growth per$$week$$is projected at an additional $200$ units through year $5($i$.$e$.,1,200$ per week in year #$1,1,400$ per week in year #$2,$ etc.$).$ Pre$-$tax profits are expected to be $$5$ per test throughout the $5-$year planning period. Two alternatives are being considered:

$1)$Expand both Test Centers A and B at the end of year $0$ to a capacity of $2,000$ units per week, at a total cost for both Test Centers of $$300,000$;

$2)$Expand Test Center A at the end of year $0$ to $1,500$ units per week, matching Test Center B$,$ at a cost of $$100,000,$ then expanding both Test Centers to $2,000$ units per year at the end of year $3,$ at an additional cost at that time of $$250,000.$

Burdell Labs will not consider projects that don't show a $5$th year positive net present value using a discount rate of $15\%.$

Use the information in Scenario $5\mathrm{.}6.$ What action, if any, should the Burdell Labs take?

Do nothing$-$neither alternative provides a positive net present value after five years.

Select Alternative #$1.$

Select alternative #$2.$

Either alternative may be selected, since the positive net present values are the same after five years.