Homework: Chapter 12 Homework (SU21) Part 3 of 4 Question 3 Score: 0.43 of 1 point Save Save LaChut Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $910,000. Projected net cash inflows are as follows: E: (Click the icon to view the projected net cash inflows.) (Click the icon to view the present value table.) (Click the icon to view the present value annuity table.) (Click the icon to view the future value table.) (Click the icon to view the future value annuity table.) Read the fequirements Requirement 1. Compute this project's NPV using LaChut Industries' 16% hurdle rate. Should LaChut Industries invest in the equipment? Why or why not? Begin by computing the project's NPV (net present value). (Round your answer to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) Net present value $ (63,403) LaChut Industries should not invest in the equipment because its NPV is negative Requirement 2. LaChut Industries could refurbish the equipment at the end of six years for $104,000. The refurbished equipment could be used one more year, providing $76,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $51,000 residual value at the end of Year 7. Should LaChut 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.) Calculate the additional NPV provided from the refurbishment. (Round your answer to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.) Additional NPV provided from refurbishment Data Table Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $263,000 $251,000 $228,000 $213,000 $204,000 $177,000 Print Done X Reference Present Value of $1 12% 14% 0.893 0.877 0.797 0.769 0.712 0.675 0.636 0.592 0.567 0.519 16% 0.862 0.743 0.641 0.552 0.476 18% 20% 0.847 0.833 0.718 0.694 0.609 0.579 0.516 0.482 0.437 0.402 Periods 1% 2% 3% 4% 5% 6% 8% 10% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.857 0.826 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.794 0.751 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.735 0.683 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 0.467 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 0.424 Period 10 0.905 0.820 0.744 0.676 0.614 0.558 0.463 0.386 Period 110.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 Period 120.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 Period 200.820 0.673 0.554 0.456 0.377 0.312 0.215 0.149 Period 25 0.780 0.610 0.478 0.375 0.295 0.233 0.146 0.092 Period 30 0.742 0.552 0.412 0.308 0.231 0.174 0.099 0.057 Period 40 0.672 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.507 0.452 0.404 0.361 0.322 0.456 0.410 0.400 0.354 0.351 0.305 0.308 0.263 0.270 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 0.287 0.237 0.195 0.257 0.208 0.168 0.229 0.182 0.145 0.205 0.160 0.125 0.183 0.140 0.108 0.104 0.073 0.051 0.059 0.038 0.024 0.033 0.020 0.012 0.011 0.005 0.003 0.162 0.135 0.137 0.112 0.116 0.093 0.099 0.078 0.084 0.065 0.037 0.026 0.016 0.010 0.007 0.004 0.001 0.001 Print Done -- Reference 1% 1.010 1.020 1.030 1.041 1.051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1.061 1.093 1.126 1.159 4% 1.040 1.082 1.125 1.170 1.217 5% 1.050 1.103 1.158 1.216 1.276 Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 20 Period 25 Period 30 Period 40 1.126 1.149 1.172 1.195 1.219 1.194 1.230 1.267 1.305 1.344 1.265 1.316 1.369 1.423 1.480 1.340 1.407 1.477 1.551 1.629 1.062 1.072 1.083 1.094 1.105 1.116 1.127 1.138 1.149 1.161 Future Value of $1 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 1.254 1.300 1.346 1.392 1.440 1.191 1.260 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 2.074 1.338 1.469 1.611 1.762 1.925 2.100 2.288 2.488 1.419 1.587 1.772 1.974 2.195 2.436 2.700 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 2.358 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 2.332 2.853 3.479 4.226 5.117 6.176 7.430 2.012 2.518 3.138 3.896 4.818 5.936 7.288 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 26.462 40.874 62.669 95.396 5.743 10.063 | 17.449 29.960 50.950 85.850 143.371 237.376 10.286 21.725 45.259 93.051 188.884 378.721 1750.378 1.469.772 1.243 1.268 1.294 1.319 1.346 1.384 1.426 1.469 1.513 1.558 1.539 1.601 1.665 1.732 1.801 1.710 1.796 1.886 1.980 2.079 1.220 1.282 1.348 1.489 1.486 1.641 1.811 2.208 1.806 2.094 2.427 3.262 2.191 2.666 3.243 4.801 2.653 3.386 4.322 7.040 Print Done