Kerwin 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: (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 annuity table.) (Click the icon to view the future value table.) Read the requirements Data Table x - X bt2 Requirements je net present values.) Year 1 Year 2 Year 3 $263,000 $254,000 $228,000 $211,000 $200,000 $177,000 1. Compute this project's NPV using Kerwin Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not? 2. Kerwin Industries could refurbish the equipment at the end of six years for $100,000. 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 $54,000 residual value at the end of Year 7. Should Kerwin 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 4 Year 5 Year 6 Reference - Present Value of $1 Periods 1 2 3 4 5 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 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 co 7 8 10% 12% 14% 0.909 0.893 0.877 0.826 0.797 0.769 0.751 0.712 0.675 0.683 0.636 0.592 0.621 0.567 0.519 0.564 0.507 0.456 0.513 0.452 0.400 0.467 0.351 0.424 0.361 0.308 0.386 0.322 0.270 0.350 0.287 0.237 0.319 0.257 0.208 0.290 0.229 0.182 0.263 0.205 0.160 0.239 0.183 0.140 0.404 2% 3% 4% 5% 6% 8% 0.980 0.971 0.962 0.952 0.943 0.926 0.961 0.943 0.925 0.907 0.890 0.857 0.942 0.915 0.889 0.864 0.840 0.794 0.924 0.888 0.855 0.823 0.792 0.735 0.906 0.863 0.822 0.784 0.747 0.681 0.888 0.837 0.790 0.746 0.705 0.630 0.871 0.813 0.760 0.711 0.665 0.583 0.853 0.789 0.731 0.677 0.627 0.540 0.837 0.766 0.703 0.645 0.592 0.500 0.820 0.744 0.676 0.614 0.558 0.463 0.804 0.722 0.650 0.585 0.527 0.429 0.788 0.701 0.625 0.557 0.497 0.397 0.773 0.681 0.601 0.530 0.469 0.368 0.758 0.661 0.577 0.505 0.442 0.340 0.743 0.642 0.555 0.481 0.417 0.315 0.673 0.554 0.456 0.377 0.312 0.215 0.610 0.478 0.375 0.295 0.233 0.146 0.552 0.412 0.308 0.231 0.174 0.099 0.453 0.307 0.208 0.142 0.097 0.046 0.410 0.354 0.305 0.263 0.227 0.370 0.314 0.266 0.225 0.191 0.335 0.279 0.233 0.194 0.162 9 10 11 12 13 14 15 0.896 0.887 0.879 0.870 0.861 0.195 0.168 0.145 0.125 0.108 0.162 0.137 0.116 0.099 0.084 0.135 0.112 0.093 0.078 0.065 20 25 30 40 0.820 0.780 0.742 0.672 0.149 0.092 0.057 0.022 0.104 0.059 0.033 0.011 0.073 0.038 0.020 0.005 0.051 0.024 0.012 0.003 0.037 0.026 0.016 0.010 0.007 0.004 0.001 0.001 Future Value of $1 12% 1.120 1254 16% 1.160 1.346 Periods 1 2 3 4 5 1% 1010 1.020 1.030 1041 1051 2% 1.020 1.040 1.061 1.082 1.104 3% 1.030 1061 1.003 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 6% 1.060 1124 1.191 1262 1.338 8% 1.080 1.166 1.260 1.360 1.469 10% 1.100 1.210 1.331 1.464 1.611 14% 1.140 1.300 1.482 1.689 1.925 18% 1.180 1.392 1643 1939 2288 20% 1.200 1.440 1.728 2074 2488 1.405 1561 1.574 1.762 1.811 2100 6 7 8 9 10 1.062 1072 1.083 1.094 1.105 1.194 1.230 1267 1.305 1.265 1.316 1.369 1.423 1.340 1.407 1477 1.551 1.629 1.419 1.504 1.594 1.689 1.791 1.587 1.714 1.851 1.999 2159 1.772 1949 2144 2.358 2.594 1974 2211 2476 2773 3106 2.195 12.502 12.853 3252 13.707 2700 315 3759 4435 5.234 2986 3.583 4.300 5. 160 16.192 1.344 1480 1.126 1.1499 1.172 1.15 1.219 1.243 1.268 1.294 1.319 1.346 2.436 2.826 3278 3.803 4411 5.117 5.936 16.886 7.988 9266 11 2 13 14 15 1.116 1.127 1.138 1.149 1.161 1.384 1.426 1469 1.513 1.558 1.539 1.601 1.665 1732 1.801 1.710 1.796 1.886 2.332 2.518 2720 2937 3.172 1.898 2.012 2.133 2261 2.397 3207 4.292 5.743 10 286 2.853 3.138 3.452 3.797 4.177 3479 3.896 4.363 4.887 5474 4.226 4818 5.492 6261 7.138 6.176 7.288 8.599 10.147 11.974 7.430 8916 10699 12 839 15.407 1.980 2.079 1.220 2191 1282 20 25 30 40 1.486 1.641 1.811 2208 1.806 2.094 2.427 13.262 2666 2653 3.386 4.322 7040 4661 6848 10.063 21.725 6.727 10.835 17.449 45.259 9646 17.000 29.960 93.05 13.743 26.462 50 950 18.884 19461 40.874 85.850 378.721 27.393 62.669 13.371 750.378 38.338 95 396 237.376 1.469.772 1348 1.489 3.243 4.801 Periods 1 2 14% 0.877 1.647 2.322 2.914 3.433 18% 0.847 1.566 2.174 2.690 3.127 4 5 6 7 8 Present Value of Annuity of $1 1% 2% 3% 4% 5% 6% 8% 10% 12% 0.990 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 1.970 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 2.941 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 5.795 5.601 5.417 5.242 5.076 4.917 4.623 4.355 4.111 6.728 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 7.652 7.325 7.020 6.733 6.463 6.210 5.747 5.335 4.968 8.566 8.162 7.786 7.435 7.108 6.802 6.247 5.759 5.328 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 12. 134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 13.004 | 12.106 | 11.296 | 10.563 9.899 9.295 8.244 7.367 6.628 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.606 6.811 18.046 | 16.351 14.877 13.590 | 12.462 | 11.470 9.818 8.514 7.469 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 25.808 22.396 | 19.600 17.292 15.372 13.765 11.258 9.4278.055 32.835 27.355 23.115 | 19.793 17.159 15.046 11.925 9.779 8.244 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4.833 5.029 5.197 5.342 5.468 5.575 3.498 3.812 4.078 4.303 4.494 9 3.889 4.288 4.639 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.623 6.873 7.003 7.105 10 11 12 13 14 15 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.870 4.948 4.979 4.997 4.656 4.793 4.910 5.008 5.092 20 25 30 40 5.929 6.097 6.177 6.233 5.353 5.467 5.517 5.548 Periods 1 2 1% 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 3% 1.000 2.030 3.091 4.184 5.309 4% 1.000 2.040 3.122 4.246 5.416 Future Value of Annuity of $1 5% 6% 8% 10% 1.000 1.000 1.000 1.000 2.050 2.060 2.080 2.100 3.153 3.184 3.246 3.310 4.310 4.375 4.506 4.641 5.526 5.637 5.867 6.105 12% 1.000 2.120 3.374 4.779 6.353 3 4 co 6 6.152 6.633 7.214 7.898 8 9 10 6.308 7.434 8.583 9.755 10.950 12.169 13.412 14.680 15.974 17.293 8.286 9.369 10.462 11.567 12.683 13.809 14.947 16.097 6.468 7.662 8.892 10.159 11.464 12.808 14.192 15.618 17.086 18.599 6.802 8.142 9.549 11.027 12.578 14.207 15.917 17.713 19.599 21.579 9.214 10.583 12.006 13.486 15.026 16.627 18.292 20.024 6.975 8.394 9.897 11.491 13.181 14.972 16.870 18.882 21.015 23.276 11 12 13 14 15 7.336 8.923 10.637 12.488 14.487 16.645 18.977 21.495 24.215 27.152 45.762 73.106 113.283 259.057 7.716 9.487 11.436 13.579 15.937 18.531 21.384 24.523 27.975 31.772 57 275 98.347 164.494 442.593 8.115 10.089 12.300 14.776 17.549 20.655 24.133 28.029 32.393 37.280 14% 16% 18% 20% 1.000 1.000 1.000 1.000 2.140 2. 160 2.180 2.200 3.440 3.506 3.572 3.640 4.921 5.066 5.215 5.368 6.610 6.877 7.154 7.442 8,536 8.977 9.442 9.930 10.730 11.414 12.142 12.916 13.233 14.240 15.327 16.499 16.085 17.519 19.086 20.799 19.337 21.321 23.521 25.959 23.045 25.733 28.755 32.150 27.271 30.850 34.931 39.581 32.089 36.786 42.219 48.497 37.581 43.672 50.818 59.196 43.842 51.660 60.965 72.035 91.025 115.380 146.628 186.688 181.871 249.214 342.603 471.981 356.787 530.312 790.948 1,181.882 1,342.025 2,360.757 4163.213 7,343.858 20 25 30 40 22.019 28.243 34.785 48.886 24.297 32.030 40.568 60.402 26.870 36.459 47.575 75.401 29.778 41.646 56.085 95.026 33.066 47.727 66.439 120.800 36.786 54.865 79.058 154.762 72.052 133.334 241.333 767.091