A Company is considering two alternative methods of producing a new product. The relevant data conce

A Company is considering two alternative methods of producing a new product. The relevant data concerning the alternatives are presented below.Alternative I Alternative IIInitial Investment $50,000 $110,000Annual receipts $36,000 $50,000 Annual Disbursements $16,000 $10,000 Annual depreciation $12,000 $16,000 Expected Life 5 years 7 years Salvage Value $0 $0At the end of the useful life of whatever equipment is chosen, the product will be discontinued. The company’s tax rate is 50 percent, and its cost of capital is 11 percent.Calculate the Net Present Value of each alternative. a. $4,276 ; $11,123 b. $9,136 ; $21,936 c. $13,236 ; $22, 577 d. $913.60 ; $2,193.60Of the two Alternatives from questions one and two, which Alternative should the company choose a. Alternative I b. Alternative II c. Both d. NeitherCalculate the internal rate of return for each alternative. a.7% ; 9% b. 22% ; 32% c. 18% ; 17% d. 1.8% ; 1.7%

 

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