Sesnie 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: (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 future value table.) Read the requirements. (Click the icon to view the present value annuity table.) (Click the icon to view the future value annuity table.) Requirement 1. Compute this project's NPV using Sesnie Industries' 14% hurdle rate. Should Sesnie 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 Data table Year 1 $264,000 Year 2 $251,000 Year 3 $228,000 Year 4 $212,000 Year 5 $203,000 Year 6 $177,000 Print Done Reference Present Value of $1 Periods 1% 2% 3% 4% Period 1 0.990 0.980 0.971 Period 2 0.980 0.961 0.943 Period 3 0.971 0.942 Period 4 0.961 0.924 Period 5 0.951 Period 6 Period 7 0.942 0.933 0.888 0.871 0.813 Period 8 0.923 Period 9 0.914 0.837 0.853 0.789 0.766 0.837 0.790 0.760 0.731 0.705 0.711 0.665 0.630 0.583 5% 6% 8% 10% 12% 14% 16% 18% 20% 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.402 0.746 Period 10 0.905 0.820 0.677 0.703 0.645 0.744 0.676 0.614 0.627 0.540 0.592 0.500 0.424 0.558 0.463 0.386 0.564 0.507 0.456 0.410 0.370 0.335 0.513 0.452 0.400 0.354 0.314 0.279 0.467 0.404 0.351 0.305 0.266 0.361 0.308 0.263 0.225 0.322 0.270 0.233 0.194 0.227 0.191 0.162 Period 11 0.896 Period 12 0.887 Period 13 0.879 0.804 0.722 0.650 0.585 0.527 0.788 0.701 0.625 0.557 0.497 0.773 0.681 0.601 0.530 0.469 0.429 0.350 0.287 0.397 0.319 0.257 0.368 0.290 0.229 0.237 0.195 0.162 0.135 0.208 0.168 0.137 0.112 0.182 0.145 0.116 0.093 Print Done Reference Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 0.564 0.507 0.437 0.402 0.456 0.410 0.370 0.335 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 Period 8 0.923 Period 9 0.914 Period 10 0.905 0.820 0.853 0.789 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.837 0.766 0.703 0.645 0.592 0.500 0.424 0.361 0.308 0.263 0.225 0.194 0.744 0.676 0.614 0.558 Period 11 0.896 0.804 0.722 Period 12 0.887 0.788 0.701 0.650 0.625 Period 13 0.879 0.773 0.681 0.601 Period 14 0.870 0.758 0.661 0.577 0.463 0.386 0.322 0.270 0.227 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 0.191 0.162 0.162 0.135 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.065 Period 20 0.820 0.673 0.554 0.456 Period 25 0.780 0.610 0.478 0.375 Period 30 Period 40 0.672 0.453 0.742 0.552 0.412 0.377 0.312 0.215 0.295 0.233 0.146 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.149 0.092 0.104 0.073 0.051 0.037 0.059 0.038 0.024 0.026 0.016 0.010 0.004 0.001 Print Done Reference Present Value of Annuity of $1 Periods 1% Period 1 0.990 Period 2 1.970 Period 3 2.941 Period 4 3.902 Period 5 4.853 Period 6 5.795 5.601 5.417 5.242 Period 7 6.728 6.472 6.230 6.002 Period 8 7.652 7.325 7.020 6.733 Period 9 8.566 8.162 7.786 7.435 Period 10 9.471 8.983 8.530 8.111 Period 11 10.368 Period 12 11.255 2% 3% 4% 5% 6% 8% 10% 12% 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 0.862 0.847 14% 16% 18% 20% 0.877 0.833 1.647 1.605 1.566 1.528 2.322 2.246 2.174 2.106 2.914 2.798 2.690 2.589 3.433 3.274 3.127 2.991 5.076 4.917 4.623 4.355 4.111 5.786 5.582 5.206 4.868 4.564 6.463 6.210 5.747 5.335 4.968 7.108 6.802 6.247 5.759 5.328 7.722 7.360 6.710 6.145 5.650 3.889 3.685 3.498 3.326 4.288 4.039 3.812 3.605 5.216 4.639 4.344 4.078 4.946 4.607 4.303 4.031 4.833 4.494 4.192 3.837 9.787 9.253 8.760 10.575 9.954 9.385 8.306 7.887 7.139 6.495 8.863 8.384 7.536 6.814 5.938 5.453 5.029 4.656 4.327 6.194 5.660 5.197 4.793 4.439 Period 13 12.134 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 Print Done Reference VIIVM Period 5 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 Period 6 5.795 Period 7 6.728 Period 8 7.652 Period 9 8.566 Period 10 9.471 Period 11 10.368 Period 12 11.255 5.601 5.417 5.242 6.472 6.230 6.002 7.325 7.020 6.733 8.162 7.786 7.435 8.983 8.530 8.111 9.787 9.253 8.760 10.575 9.954 9.385 Period 13 12.134 Period 14 13.004 Period 15 13.865 7.606 6.811 Period 20 18.046 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 Period 25 22.023 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 Period 30 25.808 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 Period 40 32.835 27.355 23.115 19.793 17.159 15.046 11.925 9.779 5.076 4.917 4.623 4.355 4.111 5.786 5.582 5.206 4.868 4.564 6.463 6.210 5.747 5.335 4.968 7.108 6.802 6.247 5.759 5.328 7.722 7.360 6.710 6.145 5.650 8.306 7.887 7.139 6.495 5.938 8.863 8.384 7.536 6.814 6.194 11.348 10.635 9.986 9.394 8.853 7.904 7.103 6.424 12.106 11.296 10.563 9.899 9.295 8.244 7.367 6.628 12.849 11.938 11.118 10.380 9.712 8.559 3.889 5.453 5.660 5.197 3.433 3.274 3.685 4.288 4.039 4.639 4.344 4.946 4.607 4.303 4.031 5.216 4.833 4.494 4.192 5.029 4.656 4.327 3.127 2.991 3.498 3.326 3.812 3.605 4.078 3.837 4.793 4.439 5.842 5.342 4.910 4.533 6.002 5.468 5.008 4.611 6.142 5.575 5.092 4.675 8.244 6.623 5.929 5.353 4.870 6.873 6.097 5.467 4.948 7.003 6.177 5.517 4.979 7.105 6.233 5.548 4.997 Print Done Reference Future Value of $1 Periods 1% 2% 3% 4% 5% 6% Period 1 1.010 1.020 1.030 1.040 1.050 1.060 8% 1.080 12% Period 2 1.020 1.040 1.061 1.082 1.103 1.124 1.166 Period 3 1.030 1.061 1.093 1.125 1.158 1.191 Period 4 1.041 1.082 1.126 1.170 1.216 1.262 1.360 Period 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 10% 1.100 1.120 1.210 1.254 1.260 1.331 1.405 1.482 1.561 1.464 1.574 1.689 1.811 1.939 1.611 1.762 14% 16% 18% 20% 1.140 1.160 1.180 1.200 1.300 1.346 1.392 1.440 1.643 1.728 2.074 1.925 2.100 2.288 2.488 Period 6 1.062 1.126 1.194 1.265 1.340 1.419 1.587 1.772 Period 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 Period 8 1.083 1.172 1.267 1.369 1.477 1.594 1.851 2.144 Period 9 1.094 1.195 1.305 1.423 1.551 1.689 Period 10 1.105 1.219 1.344 1.480 1.629 1.791 1.999 2.358 2.159 2.594 1.974 1.949 2.211 2.502 2.826 3.185 2.476 2.853 2.773 3.252 3.803 3.106 3.707 4.411 5.234 2.195 2.436 2.700 2.986 3.583 3.278 3.759 4.300 4.435 5.160 6.192 Period 11 1.116 1.243 1.384 1.539 1.710 Period 12 1.127 1.268 1.426 1.601 1.796 Period 13 1.138 1.294 1.469 1.665 1.898 2.332 2.853 3.479 4.226 5.117 2.012 2.518 3.138 3.896 4.818 5.936 1.886 2.133 2.720 3.452 4.363 5.492 6.886 6.176 7.430 7.288 8.916 8.599 10.699 Print Done Reference Period 5 1.051 1.104 1.159 1.217 1.276 1.338 1.469 1.611 1.762 1.925 2.100 2.288 Period 6 1.062 1.126 1.194 1.265 1.340 1.419 1.587 Period 7 1.072 1.149 1.230 1.316 1.407 1.504 1.714 Period 8 1.083 1.172 1.267 1.369 1.477 1.594 1.851 Period 9 1.094 1.195 1.305 1.423 1.551 1.689 1.999 2.358 Period 10 1.105 1.219 1.344 1.480 1.629 1.791 2.159 2.594 2.488 1.772 1.974 2.195 2.436 2.700 2.986 1.949 2.211 2.502 2.826 3.185 3.583 2.144 2.476 2.853 3.278 3.759 4.300 2.773 3.252 3.803 4.435 5.160 3.106 3.707 4.411 5.234 6.192 Period 11 1.116 1.243 1.384 1.539 1.710 1.898 Period 12 1.127 1.268 1.426 1.601 1.796 2.012 Period 13 1.138 Period 14 1.149 Period 15 1.161 1.294 1.469 1.665 1.886 2.133 2.720 2.332 2.853 2.518 3.138 3.452 1.319 1.513 1.732 1.980 2.261 1.346 1.558 1.801 2.079 2.397 2.937 3.172 3.797 3.479 4.226 3.896 4.818 4.363 5.492 4.887 6.261 4.177 5.474 7.138 9.266 11.974 5.117 6.176 7.430 5.936 7.288 8.916 6.886 8.599 10.699 7.988 10.147 12.839 15.407 Period 20 Period 25 Period 30 Period 40 1.220 1.486 1.806 2.191 2.653 3.207 1.282 1.641 2.094 2.666 3.386 1.348 1.811 2.427 3.243 4.322 1.489 2.208 3.262 4.801 7.040 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 93.051 188.884 378.721 750.378 |1,469.772 Print Done Reference Future Value of Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% Period 1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Period 2 2.010 2.020 2.030 2.040 2.050 2.060 2.080 2.100 2.120 2.140 2.160 2.180 2.200 Period 3 3.030 3.060 3.091 3.122 3.153 3.184 3.246 3.310 3.374 3.440 3.506 3.572 3.640 Period 4 4.060 4.122 4.184 4.246 4.310 4.375 4.506 4.641 4.779 4.921 5.066 5.215 5.368 Period 5 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 Period 6 6.152 6.308 6.468 6.633 Period 7 7.214 7.434 7.662 7.898 Period 8 8.286 8.583 Period 10 6.975 8.142 8.394 8.923 8.892 9.214 9.549 9.897 10.637 11.436 12.300 Period 9 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 6.802 7.336 7.716 8.115 8.536 8.977 9.442 9.930 9.487 10.089 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 Period 11 11.567 12.169 12.808 13.486 14.207 14.972 16.645 18.531 20.655 Period 12 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 Period 13 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 23.045 27.271 32.089 25.733 28.755 32.150 30.850 34.931 39.581 36.786 42.219 48.497 Print Done Reference Period 5 5.101 5.204 5.309 5.416 5.526 5.637 5.867 6.105 6.353 6.610 6.877 7.154 7.442 Period 6 6.152 6.308 6.468 Period 7 7.214 7.434 7.662 Period 8 8.286 8.583 Period 9 9.369 9.755 Period 10 9.214 10.159 10.583 10.462 10.950 11.464 12.006 8.892 Period 11 11.027 11.491 12.488 13.579 14.776 12.578 13.181 14.487 15.937 17.549 11.567 12.169 12.808 13.486 14.207 14.972 16.645 18.531 20.655 6.633 6.802 6.975 7.336 7.716 7.898 8.142 8.394 8.923 9.487 10.089 10.730 9.549 9.897 10.637 11.436 12.300 13.233 16.085 17.519 19.337 21.321 8.115 8.536 8.977 9.442 9.930 11.414 12.142 12.916 14.240 15.327 16.499 19.086 20.799 23.521 25.959 23.045 Period 15 Period 12 12.683 13.412 14.192 15.026 15.917 16.870 18.977 21.384 24.133 Period 13 13.809 14.680 15.618 16.627 17.713 18.882 21.495 24.523 28.029 Period 14 14.947 15.974 17.086 18.292 19.599 21.015 24.215 27.975 32.393 16.097 17.293 18.599 20.024 21.579 23.276 27.152 31.772 37.280 27.271 25.733 30.850 28.755 32.150 34.931 39.581 32.089 36.786 42.219 48.497 37.581 43.842 43.672 50.818 59.196 51.660 60.965 72.035 Period 20 Period 25 22.019 24.297 26.870 29.778 33.066 36.786 45.762 57.275 72.052 115.380 146.628 186.688 28.243 32.030 36.459 41.646 47.727 54.865 73.106 98.347 133.334 181.871 249.214 342.603 471.981 Period 30 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 Period 40 48.886 60.402 75.401 95.026 120.800 154.762 259.057 442.593 767.091 1,342.025 2,360.757 4,163.213 7,343.858 91.025 Print Done 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. Sesnie Industries could refurbish the equipment at the end of six years for $104,000. The refurbished equipment could be used one more year, providing $72,000 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.) Print Done