Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $925,000. Projected net cash inflows are as follows: Requirements Compute this project's NPV using Fielding Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not?

2. Fielding Industries could refurbish the equipment at the end of six years for $101,000. The refurbished equipment could be used one more year, providing $74,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $55,000 residual value at the end of Year 7. Should Fielding 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.)

Year 1. . . . . . . . . . . . . . . . $261,000 Year 2. . . . . . . . . . . . . . . . $254,000 Year 3. . . . . . . . . . . . . . . . $228,000 Year 4. . . . . . . . . . . . . . . . $215,000 Year 5. . . . . . . . . . . . . . . . $204,000 Year 6. . . . . . . . . . . . . . . . $174,000