Use the Information Below to Answer the Following Question(s)

question 142

Multiple Choice

Use the information below to answer the following question(s) .
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:
Sommer Corporation's hurdle rate is 12%. Assume the residual value is zero.
-If Sommer Corporation decides to refurbish the equipment at a cost of $50,000 at the end of year 6, it could be used for one more year and would have a $30,000 residual value at the end of year 7. Assume the cash inflow in year 7 is $65,000. The NPV of just the refurbishment is closest to

• A) $4,030.
• B) $15,820.
• C) $17,590.
• D) $41,170.

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Definitions:

Teratogen

Any agent capable of interfering with normal morphogenesis in an embryo, thereby causing malformations; examples include radiation, certain chemicals, and certain infectious agents.

Morphogenesis

The biological process that causes an organism to develop its shape and structure.

Neonate

Newborn individual.

Amniotic Fluid

The protective liquid contained within the amniotic sac that surrounds and cushions the fetus during pregnancy.