Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $905,000.

Projected net cash inflows are as follows

1.

Compute this project's NPV using Anderson Industries' 16% hurdle rate. Should the company invest in the equipment? Why or why not?

2.

Anderson Industries could refurbish the equipment at the end of six years for $101,000.

The refurbished equipment could be used one more year, providing $73,000 of net cash inflows in Year 7. In addition, the refurbished equipment would have a $50,000 residual value at the end of Year 7. Should Anderson 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.)

Requirement 1. Compute this project's NPV using

Anderson Industries'16% hurdle rate. Should Anderson 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 $