Scenario $5\mathrm{.}5$

The T$.$ H$.$ King Company has introduced a new product line that requires two work centers, A and B for manufacture. Work Center A has a current capacity of $10,000$ units per year, and Work Center B is capable of $12,500$ units per year. This year $($year $0),$ sales of the new product line are expected to reach $10,000$ units. Growth is projected at an additional $1,000$ units each year through year $5.$ Pre$-$tax profits are expected to be $$30$ per unit throughout the $5-$year planning period. Two alternatives are being considered:

$1)$Expand both Work Centers A and B at the end of year $0$ to a capacity of $15,000$ units per year, at a total cost for both Work Centers of $$200,000$;

$2)$Expand Work Center A at the end of year $0$ to $12,500$ units per year, matching Work Center B$,$ at a cost of $$100,000,$ then expanding both Work Centers to $15,000$ units per year at the end of year $3,$ at an additional cost at that time of $$200,000.$

The King Company will not consider projects that don't show a $5$th year positive net present value using a discount rate of $15\%.$

Use the information in Scenario $5\mathrm{.}5.$ What action, if any, should the King Company take?

Group of answer choices

Do nothing$$neither alternative provides a positive net present value after five years.

Select Alternative #$1.$

Select alternative #$2.$

Either alternative may be selected, since the positive net present values are the same after five years.