Question

i posted this question already; the answer i got didnt match up with the chart, please help!

Problem 24-4A Computing net present value of alternate investments LO P3 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. Use the (PV of $1. EV of $1. PVA of $1, and FVA of $) (Use appropriate factor(s) from the tobles provided.) Alternative 1: Keep the old machine and have it overhauled. If the old machine is overhauled, it will be kept for another five years and then sold for its salvage value. $113,000 154,e00 92,e00 46,000 Cost of old machine Cost of overhaul Annual expected revenues generated Annual cash operating costs after overhaul Salvage value of old machine in 5 years 20,000 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. $ 303,000 46,000 115,000 21,000 10,000 Cost of new machine Salvage value of old machine now Annual expected revenues generated Annual cash operating costs Salvage value of new machine in 5 years Required: 1. Determine the net present value of alternative 1. (154,000) Initial cash investment (net) Chart values are based on: 10 % Subsequent Cash inflow (outflow) (154,000) i= Present Value Table factor Year S 1 46.000 x

Answer 1

	Alternative 1
	Initial cash investment		-1,54,000.00
	Subsequent cash flow	Table factor	Present value
Year1 (92000-46000)	46,000.00	0.9091	41,818.18
Year2 (92000-46000)	46,000.00	0.8264	38,016.53
Year3 (92000-46000)	46,000.00	0.7513	34,560.48
Year4 (92000-46000)	46,000.00	0.6830	31,418.62
Year5 (92000-46000)	46,000.00	0.6209	28,562.38
Salavage value	20,000.00	0.6209	12,418.43
		ToTAL	1,86,794.62
	Net present value (186794.62-154000)		32,794.62
	Alternative 2
	Initial cash investment		-3,03,000.00
	Salvage value of old machine now		46,000.00
	Net initial cash outflow		-2,57,000.00
	Subsequent cash flow	Table factor	Present value
Year1 (115000-21000)	94,000.00	0.9091	85,454.55
Year2 (115000-21000)	94,000.00	0.8264	77,685.95
Year3 (115000-21000)	94,000.00	0.7513	70,623.59
Year4 (115000-21000)	94,000.00	0.6830	64,203.26
Year5 (115000-21000)	94,000.00	0.6209	58,366.60
Salavage value	10,000.00	0.6209	6,209.21
		ToTAL	3,62,543.17
	Net present value (362543.17-257000)		1,05,543.17
The management should select the second alternative because it has
higher higher NPV