Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $260,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 2 years, and it requires a 8% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the table provided.) Period 1 2 3 4 5 Cash Flow $123,900 92,500 70,300 52,900 48,600 Required: 1. Determine the payback period for this investment. 2. Determine the break-even time for this investment. 3. Determine the net present value for this investment. Year Cash inflow (outflow) 0 $ 1 Cumulative Net Cash Inflow (outflow) $ (260,000) (136,100) (43,600) 26,700 79,600 128,200 2 (260,000) 123,900 92,500 70,300 52,900 48,600 128,200 3 4 5 2 and year: 2 x Calculate the payback period: Payback occurs between year: Calculate the portion of the year: Numerator for partial year Denominator for partial year $ 0.4 years 26,700 X 70,300 $ Payback period = 2.3 x years Year Cash inflow (outflow) Table factor Present Value of Cash Flows Cumulative Present Value of Cash Flows $ (260,000) 0 $ 1.0000 $ (260,000) 1 0.0000 0 2 $ (260,000) 123,900 92,500 70,300 52,900 48,600 128,200 0.8573 0.7938 3 $ 79,300 55,804 38,882 4 0.7350 $ 5 0.6806 $ 33,077 IS 3 and year: 4 Calculate the break even time: Break-even time occurs between year: Calculate the portion of the year: Numerator for partial year Denominator for partial year $ 0 X 0 $ 0 x Break-even time = 0.0 x Net present value $ 48,209 X