Gammaro Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $915,000. Projected net cash inflows are as follows:

ne phase of its production process. The manufacturing equipment has a six-year life and will cost $915 Requirements 1. Compute this project's NPV using Gammaro Industries' 16% hurdle rate. Should the company invest in the equipment? Why or why not? 2. Gammaro Industries could refurbish the equipment at the end of six years for $100,000. The refurbished equipment could be used one more year, providing $78,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $53,000 residual value at the end of Year 7. Should Gammaro Industries invest in the equipment and refurbish it after six years? Why or why not? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.) Print Done Question 3, E12-31A (S... Part 1 of 4 HW SC O Poi uction process. The manufacturing equipment has a six-year life and Data Table Year 1... Year 2..... Year 3.... Year 4.... ht? $262,000 $252,000 $227,000 $214,000 $203,000 $178,000 for Year 5... --- Year 6... Print Done follows 1 Reference Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 Period 3 0.971 0.9420.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.5520.516 0.482 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 Period 7 0.933 0.871 0.813 0.760 0.7110.665 0.583 0.513 0.452 0.400 0.354 0.314 0279 Period 8 0.923 0.853 0.789 0.731 0.677 0.6270.540 0.467 0.4040.351 0.305 0.266 0.233 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0 194 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 0.322 0.270 0.227 0.191 0162 Period 11 0.896 0.804 0.722 0.650 0,585 0.527 0.429 0.350 0.287 0.237 0.1950.162 0.135 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 Period 14 0.870 0.758 0.661 0.5770 505 0.442 0.340 0.263 0.2050 160 0.125 0.099 0.078 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 Period 20 0.820 0.673 0.554 0.456 0377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 Period 30 0.742 0.552 0.412 0.308 0.231 0 174 0.099 0.057 0.033 0.0200.0120.007 0.004 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 Print Done Reference 18% 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2. 106 2.589 2.991 Present Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% Period 1 0.990 0.980 0.971 0.962 0.952 0943 0.926 0.909 0.893 0.877 0.862 Period 2 1.970 1.942 1913 1.886 1.859 1833 1.783 1736 1.690 1647 1.605 Period 3 2.941 2.884 2.8292775 2.723 2673 2.577 2487 2.402 2.322 2.246 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 Period 5 4.853 4.713 4.580 4.452 43294212 3 993 3.791 3.605 3.433 3.274 Period 6 5.795 5.601 5.417 5.242 5.076 49174.623 4.355 4.111 3.889 3.685 Period 7 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.86845644 288 4.039 Period 8 7.652 7.325 7020 6.733 6.463 6.210 5.7475 335 4 968 4.639 4.344 Period 9 8.566 8.1627.786 7.4357 108 6.8026.247 5.759 5.328 4.9464.607 Period 10 9.471 8.983 8.530 8.111 7.7227360 6.710 6.145 5.650 5.216 4833 Period 1110.368 | 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 Period 12 11.255 10.575 9.9549,3858.863 8 384 7.536 6.814 6.194 5660 5.197 Period 13 12.134 11.348 10.635 9.986 9.3948.853 7 904 7 103 6.424 5.842 5.342 Period 14 13.004 12.106 11.296 10.563 9,899 9.295 8.244 7.367 6.628 6.002 5.468 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7 606 6.811 6.142 5.575 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.5147469 6.623 5.929 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.0777843 6.873 6.097 Period 30 25.808 22 396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 6.177 Period 40 32.835 27.355 23.115 19.793 17 159 15.046 11.925 9.7798.244 7105 6.233 3.498 3326 3.812 3.605 4.078 3.837 4303 4.031 4.494 4.192 4.656 4.327 4.793 4.439 4.910 4.533 5.008 4.611 5.092 4.675 5.353 5.467 5.517 5.548 4.870 4.948 4.979 4.997 Print Done - X Reference Future Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1216 1276 Period 6 Period 7 Period 8 Period 9 Period 10 1.062 1.072 1.083 1.094 1.105 3% 1.030 1061 1.093 1.126 1.159 1.194 1230 1.267 1.305 1 344 1384 1.426 1.469 1.513 1.558 1.126 1.149 1.172 1.195 1.219 1 243 1.268 1.294 1.319 1 346 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1710 1.796 1.886 1.980 2.079 6% 8% 10% 12% 14% 16% 18% 20% 1.060 1.080 1.100 1.120 1.140 1.160 1.180 1.200 1.124 1.166 1.210 1254 1.300 1 346 1.392 1.440 1.191 1260 1.331 1.405 1.482 1.561 1.643 1.728 1.262 1.360 1.464 1.574 1.689 1.811 1.939 2074 1.338 1.469 1.611 1.762 1.925 2100 2 288 2.488 1.419 1.587 1.772 1974 2 195 2436 2700 2.986 1.504 1.714 1.949 2.211 2.502 2.826 3.185 3.583 1.594 1.851 2.144 2.476 2.853 3.278 3.759 4.300 1 689 1.999 2358 2.773 3.252 3.803 4.435 5.160 1.791 2.159 2.594 3.106 3.707 4.411 5.234 6.192 1.898 2332 2 853 3.479 4226 5.117 6.176 7.430 2012 2.518 3.138 3.896 4.818 5.936 7288 8.916 2 133 2.720 3.452 4.363 5.492 6 886 8.599 10.699 2.261 2.937 3.797 4.887 6.261 7.988 10.147 12.839 2.397 3.172 4.177 5.474 7.138 9.266 11.974 15.407 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38 338 4.292 6.848 10.835 17.000 28.462 40.874 62.869 95 396 5.743 10.063 17.449 29.960 50.950 85.850 143,371 237,376 10.286 21725 45.259 93.051 188 884 378.721 750 378 1,489.772 Period 11 Period 12 Period 13 Period 14 Period 15 Period 20 Period 25 Period 30 Period 40 1.116 1.127 1.138 1.149 1.161 1.539 1601 1.665 1.732 1.801 1.220 1 282 1 348 1.489 1.486 1.641 1 811 2.208 1.806 2094 2.427 3.262 2.191 2.666 3.243 4.801 2.653 3.386 4.322 7.040 Print Done Reference Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Future Value of Annuity of $1 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2010 2020 2.030 2.040 2.050 2.060 2.080 2.100 2120 2.140 2. 160 2. 180 2 200 3.030 3,060 3.091 3.122 3.153 3.184 3.246 3310 3 374 3.440 3.506 3.572 3.640 4,060 4.122 4.184 4.246 4310 4 375 4506 4.641 4.779 4.921 5.066 5.215 5.368 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 6.152 6.308 6.468 6.633 6.802 6.975 7336 7716 8.115 8.536 8.977 9.442 9.930 7.214 7434 7 662 7.898 8.142 8.394 8.923 9.487 10.089 10.730 11.414 12.142 12.916 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 12.300 13.233 14.240 15.327 16.499 9.369 9.755 10.159 10.583 11.027 11 49112 488 13.579 14.776 16.085 17.519 19.086 20.799 10.462 10.950 11.464 12.006 12.578 13.181 14.487 15.937 17.549 19.337 21.321 23.521 25.959 11.567 12.169 12 808 13.486 14.207 14.972 16,645 18.531 20.655 23.045 25.733 28.755 32.150 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21 384 24.133 27 271 30.850 34.931 39.581 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 32.089 36.786 42.219 48.497 14.94715.974 17.086 18.292 19.599 21.015 24.215 27.975 32 393 37581 43.872 50 818 59 196 16.09717,293 18.599 | 20.024 21.579 23.276 27.152 31.772 37 280 43.842 51660 60.965 72.035 22.019 24 297 26.870 29.778 33.066 36.786 45.762 57.275 72.052 91.025 115.380 146.628 186.688 28.243 32.03036.459 41.646 47.72754.865 73.106 98.347 133 334 181 871 249.214 342 603 471.981 34.785 40.568 47 575 56.085 66.439 79.058 113.283 164 494 241 333 356 787 530 312 790.948 1 181 882 48.886 60.40275.401 95.026 120.800 154.762 259,057 442.593 767.091 1,342.025 2,360.757 4.163.213 7,343 858 Period 11 Period 12 Period 13 Period 14 Period 15 Period 20 Period 25 Period 30 Period 40 Print Done