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: Requirements

1. Compute this project's NPV using Sesnie Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not?

2. SesnieSesnie Industries could refurbish the equipment at the end of six years for $102,000. The refurbished equipment could be used one more year, providing $77,000 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 Sesnie 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.)

Data Table Year 1. . . . . . . . . . . . . . . . $264,000 Year 2. . . . . . . . . . . . . . . . $251,000 Year 3. . . . . . . . . . . . . . . . $224,000 Year 4. . . . . . . . . . . . . . . . $213,000 Year 5. . . . . . . . . . . . . . . . $205,000 Year 6. . . . . . . . . . . . . . . . $174,000