mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Flms.mheducation.com%252F nt Chapter 24 i ces Saved 8 * Help Save & Exit Problem 24-6A (Algo) Net present value of alternate investments LO P3 Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. (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. This requires an initial investment of $160,000 and results in $60,000 of net cash flows in each of the next five years. After five years, it can be sold for a $20,000 salvage value. Alternative 2: Sell the old machine for $30,000 and buy a new one. The new machine requires an initial investment of $310,000 and can be sold for a $20,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $50,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative 2. 3. Which alternative should management select based on net present value? Complete this question by entering your answers in the tabs below. 2 Required 1 Required 2 Required 3 D F2 # W S Q Search F4 F3 45 % 3 E D R O+ F6 < Prev 7 of 7 Next > Y 10 & 7 F8 H F9 F10 DOD F11 G H J K X C V B N M ) Ciri Sub 1:59 11/11/2 Delete F12 insent + 11 1 Backsp pter 24 i Saved Help Save & Exit Su Determine the net present value of alternative 1. (Do not round intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole dollar.) Required 1 Required 2 Required 3 Year 1-5 Salvage value (year 5) Totals Initial investment Net present value Net Cash Flows Present Value Factors at 10% Present Value of Cash Flows F2 + 0 < Required 1 Required 2 > Q Search - F4 55 < Prev 7 of 7 Next > LO F6 F7 # $ 3 5 % W E R Y S D 27 & FB * 8 F9 a ( 1:59 11/11/2 Delete F10 F11 F12 Insert Prise + 11 [ ] G H J K X C V B N M Alt Ciri Backspa apter 24 2. Determine the net present value of alternative 2. Saved 3. Which alternative should management select based on net present value? es Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Which alternative should management select based on net present value? Management should select D C 2 A+ Q Search < Required 2 Required 3 < Prev F5 0+ F6 10 7 of 7 Next F7 + & #3 S % 5 7 W E R T Y U F8 * 00 O F9 9 D Help Save & S F10 F11 F12 Insert Prisc + 11 [ ] S D G H J K Z X C V B N M