Learning Objectives 2,4 P11-31A Using payback, ARR, and NPV with unequal cash flows Mandel Manufacturing, Inc. has a manufacturing machine that needs attention. The company is considering two options. Option 1 is to refurbish the current machine at a cost of $1,100,000. If refurbished, Mandel expects the machine to last another eight years and then have no residual value. Option 2 is to replace the machine at a cost of 1. Refurbish $116,260 NPV; Purchase 4.2 years payback al value. Mandel $2,200,000. A new machine wo expects the following net cash inflow A new machine would last 10 years and have no residual value he following net cash inflows from the two options: Purchase New Year Machine Refurbish Current Machine $ 280,000 500,000 380,000 260,000 140,000 140,000 140,000 140,000 $ 260,000 740,000 620,000 500,000 380,000 380,000 380,000 380,000 380,000 380,000 $ 4,400,000 Total $ 1,980,000 Mandel uses straight-line depreciation and requires an annual return of 16%. Requirements 1. Compute the payback, the ARR, the NPV, and the profitability index of these two options. 2. Which option should Mandel choose? Why