Sommer Corporation is deciding whether to automate one phase of its production process. The equipment...
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Accounting
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:
| Year 1 | $115,000 |
| Year 2 | $100,000 |
| Year 3 | $110,000 |
| Year 4 | $100,000 |
| Year 5 | $95,000 |
| Year 6 | $90,000 |
Sommer Corporation's hurdle rate is 12%. Assume the residual value is zero.
Which one of the following amounts is the net present value of the Sommer Corporation equipment?
A.
$13,749
B.
$102,679
C.
$200,000
D.
$207,719
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