(Present Value Tables Are Needed - Sommer Corporation's Hurdle Rate Is 12

question 71

Multiple Choice

(Present value tables are needed.) Sommer Corporation is deciding whether to automate one phase of its production process.The equipment has a six-year life and will cost $410,000.Projected net cash inflows from the equipment are as follows: $$\begin{array} { | c | r | } \hline \text { Year 1 } & \$ 115,000 \\\hline \text { Year } \mathbf { 2 } & \$ 100,000 \\\hline \text { Year } 3 & \$ 110,000 \\\hline \text { Year 4 } & \$ 100,000 \\\hline \text { Year } 5 & \$ 95,000 \\\hline \text { Year } 6 & \$ 90,000 \\\hline\end{array}$$
- Sommer Corporation's hurdle rate is 12%.Assume the residual value is zero.
What is the net present value of the equipment?

• A)$(13,810)
• B)$2,302
• C)$13,810
• D)$15,000

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