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A company wishes to buy new equipment for $12,500. The equipment is expected to generate an additional $4,100 in cash inflows for six years. All

A company wishes to buy new equipment for $12,500. The equipment is expected to generate an additional $4,100 in cash inflows for six years. All cash flows occur at year-end. A bank will make a $22,000 loan to the company at a 13% interest rate so that the company can purchase the equipment. Use the table below to determine break-even time for this equipment:

Year Present Value of 1 at 13%
0 1.0000
1 0.8850
2 0.7831
3 0.6931
4 0.6133
5 0.5428
6 0.4803

Multiple Choice

Break-even time is between two and three years.

Break-even time is between three and four years.

Break-even time is between four and five years.

Break-even time is between five and six years.

This project will never break-even.

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