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3. LaChut Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $900,000. Projected net cash inflows are as follows: 1 (Click the icon to view the projected net cash inflows.) 2 (Click the icon to view the present value table.) 3 (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 requirements 6. 4 5 Requirement 1. Compute this project's NPV using LaChut Industries' 14% 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 LaChut Industries (1) invest in the equipment because its NPV is (2) Requirement 2. LaChut Industries could refurbish the equipment at the end of six years for $100,000. The refurbished equipment could be used one more year, providing $75,000 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 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 to overcome the original NPV of the equipment. Therefore, the refurbishment (5) alter The refurbishment provides a (3) NPV. The refurbishment NPV is (4) LaChut Industries' original decision regarding the equipment investment. 1: Data Table Year 1.. $261,000 Year 2.... Year 3. $255,000 $225,000 $213,000 Year 4.. Year 5.. $204,000 Year 6. $176,000 2: Reference Present Value of $1 16% 18% Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 0.990 0.980 0.971 0.961 0.951 2% 0.980 0.961 0.942 0.924 0.906 3% 0.971 0.943 0.915 0.888 0.863 4% 0.962 0.925 0.889 0.855 0.822 5% 6% 8% 10% 12% 0.952 0.943 0.926 0.909 0.893 0.907 0.890 0.857 0.826 0.797 0.864 0.840 0.794 0.751 0.712 0.823 0.792 0.735 0.683 0.636 0.747 0.681 0.621 0.567 14% 0.877 0.769 0.675 0.592 0.519 0.862 0.743 0.641 0.552 0.476 20% 0.847 0.833 0.718 0.694 0.609 0.579 0.516 0.482 0.437 0.402 0.784 Period 6 0.942 Period 7 0.933 Period 8 0.923 Period 9 0.914 Period 10 0.905 0.888 0.871 0.853 0.837 0.820 0.837 0.813 0.789 0.766 0.744 0.790 0.760 0.731 0.703 0.676 0.746 0.705 0.630 0.564 0.711 0.665 0.583 0.513 0.677 0.627 0.540 0.467 0.645 0.592 0.500 0.424 0.614 0.558 0.463 0.386 0.507 0.452 0.404 0.361 0.322 0.456 0.400 0.351 0.308 0.270 0.410 0.354 0.305 0.263 0.227 0.370 0.335 0.3140.279 0.266 0.233 0.225 0.194 0.191 0.162 Period 110.896 Period 12 0.887 Period 13 0.879 Period 14 0.870 Period 15 0.861 0.804 0.788 0.773 0.758 0.743 0.722 0.701 0.681 0.661 0.642 0.650 0.625 0.601 0.577 0.555 0.585 0.527 0.429 0.350 0.557 0.497 0.397 0.319 0.530 0.469 0.368 0.290 0.505 0.442 0.340 0.263 0.481 0.417 0.315 0.239 0.287 0.257 0.229 0.205 0.183 0.237 0.208 0.182 0.160 0.140 0.195 0.168 0.145 0.125 0.108 0.162 0.135 0.137 0.112 0.116 0.093 0.099 0.078 0.084 0.065 Period 20 0.820 Period 25 0.780 Period 30 0.742 Period 40 0.672 0.673 0.610 0.552 0.453 0.554 0.478 0.412 0.307 0.456 0.375 0.308 0.208 0.377 0.295 0.231 0.142 0.312 0.215 0.149 0.104 0.2330.146 0.092 0.059 0.174 | 0.099 0.057 0.033 0.097 0.046 0.022 0.011 0.073 0.038 0.020 0.005 0.051 0.037 0.026 0.024 0.0160.010 0.012 0.007 0.004 0.003 0.001 0.001 3: Reference Present Value of Annuity of $1 18% Periods Period 1 Period 2 Period 3 Period 4 Period 5 1% 0.990 1.970 2.941 3.902 4.853 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 0.980 0.971 0.962 0.9520.943 0.926 0.909 0.893 0.877 0.862 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.605 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.246 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 | 2.798 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.274 0.847 1.566 2.174 2.690 3.127 20% 0.833 1.528 2.106 2.589 2.991 Period 6 5.795 Period 7 6.728 Period 8 7.652 Period 9 8.566 Period 10 9.471 5.601 5.417 5.2425.076 4.917 4.623 4.355 4.111 3.889 3.685 6.472 6.230 6.002 5.786 5.582 5.206 4.868 4.564 4.288 4.039 7.325 | 7.020 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 8.1627.786 7.435 | 7.108 6.8026.247 5.759 5.328 4.946 4.607 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.6505.216 4.833 3.498 3.812 4.078 4.303 4.494 3.326 3.605 3.837 4.031 4.192 Period 11 | 10.368 9.787 9.253 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 Period 12 | 11.255 10.575 9.954 9.385 8.863 8.384 7.536 6.814 6.194 5.660 5.197 Period 13 | 12. 134 11.348 10.635| 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 Period 14 13.004 12.106 11.296 10.563 9.899 9.295 8.244 7.3676.628 6.002 5.468 Period 15 13.865 12.849 11.938 11.118 10.380 9.712 8.559 7.606 6.811 6.142 5.575 4.656 4.793 4.910 5.008 5.092 4.327 4.439 4.533 4.611 4.675 Period 2018.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 6.623 5.929 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.8436.873 6.097 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.4278.055 7.003 6.177 Period 40 32.835 27355 23.115 19.793 17.159 15.046 11.925 9.7798.244 7.105 6.233 5.353 5.467 5.517 5.548 4.870 4.948 4.979 4.997 4: Reference Future Value of $1 Periods Period 1 Period 2 Period 3 Period 4 Period 5 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 5% 1.050 1.103 1.158 1.216 1.276 6% 1.060 1.124 1.191 1.262 1.338 8% 1.080 1.166 1.260 1.360 1.469 10% 1.100 1.210 1.331 1.464 1.611 12% 1.120 1.254 1.405 1.574 1.762 14% 1.140 1.300 1.482 1.689 1.925 16% 1.160 1.346 1.561 1.811 2.100 18% 1.180 1.392 1.643 1.939 2.288 20% 1.200 1.440 1.728 2.074 2.488 1.217 1.062 1.072 Period 6 Period 7 Period 8 Period 9 Period 10 1.083 1.094 1.105 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 1.419 1.504 1.594 1.689 1.791 1.587 1.714 1.851 1.999 2.159 1.772 1.949 2.144 2.358 2.594 1.974 2.211 2.476 2.773 3.106 2.195 2.502 2.853 3.252 3.707 2.436 2.826 3.278 3.803 4.411 2.700 3.185 3.759 4.435 5.234 2.986 3.583 4.300 5.160 6.192 Period 11 Period 12 Period 13 Period 14 Period 15 1.116 1.127 1.138 1.149 1.161 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 1.898 2.012 2.133 2.261 2.397 2.332 2.518 2.720 2.937 3.172 2.853 3.138 3.452 3.797 4.177 3.479 3.896 4.363 4.887 5.474 4.226 4.818 5.492 6.261 7.138 5.117 5.936 6.886 7.988 9.266 6.176 7.288 8.599 10.147 11.974 7.430 8.916 10.699 12.839 15.407 Period 20 Period 25 Period 30 Period 40 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 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 93.051 188.884 378.721750.3781,469.772 5: Reference Future Value of Annuity of $1 Periods 1% 3% 4% 5% 6% 8% 10% 14% 18% 1.000 2.080 Period 1 Period 2 Period 3 Period 4 Period 5 1.000 2.010 3.030 4.060 5.101 2% 1.000 2.020 3.060 4.122 5.204 1.000 2.030 3.091 4.184 5.309 1.000 2.040 3.122 4.246 5.416 1.000 2.050 3.153 4.310 5.526 1.000 2.060 3.184 4.375 5.637 12% 1.000 2.120 3.374 4.779 6.353 1.000 2.100 3.310 4.641 6.105 16% 1.000 2.160 3.506 5.066 6.877 1.000 2.140 3.440 4.921 6.610 3.246 20% 1.000 2.200 3.640 5.368 7.442 1.000 2.180 3.572 5.215 7.154 4.506 5.867 Period 6 Period 7 Period 8 Period 9 Period 10 6.152 6.308 6.468 6.633 6.802 6.975 7.336 7.716 8.115 7.214 7.434 7.662 7.898 8.142 8.394 8.923 9.487 10.089 8.286 8.583 8.892 9.214 9.549 9.897 10.637 11.436 12.300 9.369 9.755 10.159 10.583 11.027 11.491 12.488 13.579 14.776 10.462 10.950 11.464 12.006 12.578 13.181 14.487 15.937 17.549 8.536 10.730 13.233 16.085 19.337 8.977 11.414 14.240 17.519 21.321 9.442 12.142 15.327 19.086 23.521 9.930 12.916 16.499 20.799 25.959 Period 11 Period 12 Period 13 Period 14 Period 15 11.567 12. 169 12.808 13.486 14.207 14.972 16.645 18.531 20.655 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 13.809 14.680 15.618 | 16.627 17.713 18.882 21.495 24.523 28.029 14.947 15.974 17.086 18.292 19.599 21.015 24.215 27.975 32.393 16.097 | 17.29318.599 20.024 21.579 23.276 27.152 31.772 37.280 23.045 27.271 32.089 37.581 43.842 25.733 30.850 36.786 43.672 51.660 28.755 34.931 42.219 50.818 60.965 32.150 39.581 48.497 59.196 72.035 Period 20 Period 25 Period 30 Period 40 22.019 24.297 26.870 29.778 33.066 36.786 45.762 57.275 | 72.052 91.025 115.380 146.628 186.688 28.243 32.03036.459 41.646 47.727 54.865 | 73.106 98.347 133.334 181.871 249.214 342.603 471.981 34.785 40.568 47.575 56.085 66.439 79.058 113.283 164.494 241.333 356.787 530.312 790.948 1,181.882 48.886 60.402 75.401 95.026 120.800 154.762 259.057 442.593 767.091 1,342.025 2,360.757 4,163.2137,343.858 6: Requirements 1. Compute this project's NPV using LaChut Industries' 14% hurdle rate. Should the company invest in the equipment? Why or why not? 2. LaChut Industries could refurbish the equipment at the end of six years for $100,000. The refurbished equipment could be used one more year, providing $75,000 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 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.) (1) O should should not (2) O negative O positive (3) O negative O positive (4) O large enough not large enough (5) O should O should not