Year 1 $ 263,000 Year 2 254,000 Year 3 223,000 Year 4 214,000 Year 5 203,000 Year 6 175,000 Present Value of Ordinary Annuity of $1 Periods 2% 5% 8% 1% 3% 4% 6% 7% 9% 10% 12% 14% 15% 16% 18% 20% 0.980 0.962 0.952 0.926 0.909 0.893 0.870 0.833 1 0.990 0.971 0.943 0.935 0.917 0.877 0.862 0.847 2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.690 1.647 1.626 1.566 1.528 1.605 3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.283 2.246 2.174 2.106 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.855 2.798 2.690 2.589 4.713 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 2.991 5 4.853 4.580 3.352 3.274 3.127 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355 4.111 3.889 3.784 3.685 3.498 3.326 7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 6.210 4.639 8 7.652 7.325 7.020 6.733 6.463 5.971 5.747 5.535 5.335 4.968 4.487 4.344 4.078 3.837 9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.303 4.031 10 9.471 8.983 8.530 7.722 7.360 6.710 6.418 5.650 5.216 5.019 4.833 4.494 4.192 8.111 7.024 6.145 9.787 11 10.368 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 11.255 10.575 12.134 11.348 13.004 12.106 11.296 10.563 13.865 12.84911.938 11.118 10.380 12 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814 6.194 5.660 5.421 5.197 4.793 4.439 10.635 9.986 5.842 13 9.394 8.853 8.358 7.904 7.487 7.103 6.424 5.583 5.342 4.910 4.533 14 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.724 5.468 5.008 4.611 8.559 8.061 7.606 6.811 5.092 4.675 15 9.712 9.108 6.142 5.847 5.575 14.718 13.578 12.561 11.652 10.838 10.106 16 9.447 8.851 8.313 7.824 6.974 6.265 5.954 5.669 5.162 4.730 Eve 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.) E(Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements Requirement 1. Compute this project's NPV using Eve's 16% hurdle rate. Should Eve invest in the equipment? Use the following table to calculate the net present value of the project. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Present Net Cash PV Factor (i 16%) Years Inflow Value Present value of each year's inflow: (n 1) 1 2 (n 2) (n = 3) 3 4 (n 4) (n 5) 5 (n 6) Total PV of cash inflows Initial investment C (n 6) 6 Total PV of cash inflows 0 Initial investment Net present value of the project invest in the equipment Eve Industries Requirement 2. Eve could refurbish the equipment at the end of six years for $100,000. The refurbished equipment could be used one more year, providing $76,000 of net cash inflows in year 7. Additionally, the refurbished equipment would have a $50,000 residual value at the end of year 7. Should Eve invest in the equipment and refurtbish it after six years? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back the present value.) Calculate the NPV of the refurbishment. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or minus sign for cash outflows and for a negative net present value.) Cash PV Factor Present (i = 16% ) (outflow)/inflow Value Refurbishment at the end of Year 6 (n 6) Cash inflows in Year 7 (n= 7) Residual value (n 7) Net present value of the refurbishment alter Eve Industries NPV, The refurbishment NPV is to overcome the original NPV of the equipment. Therefore, the refurbishment The refurbishment provides a original decision regarding the equipment investment