Reference no: EM13606803

Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another seven years and then sold for its salvage value. Cost of old machine $112,000 Cost of overhaul $141,000 Annual expected revenues generated $92,000 Annual cash operating costs after overhaul $47,000 Salvage value of old machine in 7 years $18,000 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 $301,000 Salvage value of old machine now $33,000 Annual expected revenues generated $109,000 Annual cash operating costs $29,000 Salvage value of new machine in 7 years $11,000

1. Determine the net present value of alternative 1. (Negative amount should be indicated by a minus sign. Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.) 2.Determine the net present value of alternative

2. (Negative amount should be indicated by a minus sign. Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.)