Pete Co. The plant cannot produce more than 450 parts annually. To meet future​ demand, Pete Co. must either modernize t

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Pete Co.
The plant cannot produce more than 450 parts annually. To meet
future​ demand,
Pete Co. must either modernize the plant or replace it. The old
equipment is fully depreciated and can be sold for $2,700,000 if
the plant is replaced. If the plant is​modernized, the costs to
modernize it are to be capitalized and depreciated over the useful
life of the updated plant. The old equipment is retained as part of
the modernize alternative. The following data on the two options
are​ available
Pete Co produces the following parts:
Year
# units
2022
500
2023
550
2024
650
2025
600
2026
725
2027
690
Selling Price
$100,000 per unit
Other information:
Modernize
Replace
Initial investment
$28,000,000
$60,000,000
Annual cash operating cost per unit
$78,000
$71,000
For​ simplicity, we assume no change in prices or costs in
future years.
​Pete's required rate of return is 11%.
1-Calculate the cash inflows and outflows of A)
the modernize and B) replace alternatives over the
2022-2027 period.
2. Calculate payback period for the A)
modernize and B) replace alternatives.
3.Calculate net present value of A) the
modernize and B) replace alternatives.
4.What factors should Pete consider in choosing between the
alternatives
Required: Using FORMULAS, prepare a worksheet to answer
questions 1 to 4
Rules/steps to consider: