NPV using Excel: Miller Manufacturing is considering either replacing one of its old machines with a new one, or having the old machine repaired. Information about the two alternatives follows. Management requires a required rate of return of 10%. Alternative 1: Keep the old machine and have it repaired. If the old machine is repaired, it will be kept for another 5 years and then sold for its salvage value. Cost of old machine $125,000 Cost of repairs 160,000 Annual expected revenues generated 96,000 Annual cash operating costs after repairs 40,000 Salvage value of old machine in 5 years 15,000 Alternative 2: Sell the old machine and buy a new one. The new machine is more efficient and will yield substantial operating cost savings with more product being produced and sold. Cost of new machine $305,000 Salvage value of old machine now 28,000 Annual expected revenues generated 100,000 Annual cash operating costs after repairs 30,000 Salvage value of new machine in 5 years 18,000 Using Excel, set up each alternative and show the annual net cash flows. Use the NPV function in excelto solve. Which alternative would you select? Below is an example of how you would set up the problem in Excel: Alt. 1 Net cash Alt. 2 Net cash Flows Flows Year 1 Year 2 Year 3 Year 4 Year 5 PV of cash flows Initial investment Salvage value now Net present value NPV formula here - na Be sure to identify which alternative you would select