Question
A manufacturer is considering buying a new machine that costs $10,500. The machine is projected to produce an additional $3,500 in cash inflows for six
A manufacturer is considering buying a new machine that costs $10,500. The machine is projected to produce an additional $3,500 in cash inflows for six years. All cash flows occur at year-end. The manufacturer plans to borrow $16,000 at a 15% interest rate in order to purchase the machine. Use the table below to determine break-even time for this machine: Year Present Value of 1 at 15% 0 1.0000 1 0.8696 2 0.7561 3 0.6575 4 0.5718 5 0.4972 6 0.4323 A. Break-even time is between two and three years. B. Break-even time is between five and six years. C. Break-even time is between four and five years. D. Break-even time is between three and four years. E. This project will never break-even.
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