Problem $24-6$A $($Algo$)$ Net present value of alternate Investments LO P$3$

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.$)$

Alternotlve $1$: Keep the old machine and have it overhauled. This requires an initial investment of $$140,000$ and results in $$80,000$ of

net cash flows in each of the next five years. After five years, it can be sold for a $$10,000$ salvage value.

Alternatlve $2$: Sell the old machine for $$50,000$ and buy a new one. The new machine requires an initial investment of $$295,000$ 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:

Determine the net present value of alternative $1.$

Determine the net present value of alternative $2.$

Which altemative should management select based on net present value?

Complete this question by entering your answers in the tabs below.

Determine the net present value of alternative $1.($Do not round intermedlate calculations. Round your present value factor to

$4$ decimals and final answers to the nearest whole dollar.$)$

Required $2$

Determine the net present value of alternative $2.($Negative net present values should be indicated with a minus sign. Do not

round intermediate calculations. Round your present value factor to $4$ decimals and final answers to the nearest whole dollar.$)$