Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 12% rate of return on its investments. Use the (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value. Please show work

Interstste Monufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires 12% rate of return on its investments. Use the (PV of $1, FV of $1, PVA of $1, and FVA of $0 (Use approprlate factor(s) from the tables provided.) Alternatlve 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value. Cost of old machine Cost of overhaul Annual expected revenues generated Annual cash operating costs after overha Salvage value of old machine in 5 years $107,008 146,880 9e,008 48,88 18,080 Alternative 2: Sell the old machine and buy new one. The new machine is more efficient and will yield substantial operating cost sovings with more product being produced ond sold. Cost of new machine Salvage value of oldmachine now Annual expected revenues generated Annual cash operating costs Salvage value of new machine in 5 years 12,808 $296,80e 42,800 112,800 23,800 Required: Determine the net present value of alternative 1. Initial cash investment (net) value8 are b88ed on: Subsequent Cash Innow | x | Table factor |= | Present Value Year outflo 2.0000 resent value af cash inflows t present value Determine the net t value of alternative 2 Initial cash investment (net) Subsequent Cash Infow x Table factor Year Present Value outflo Now Which alternative should management select