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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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