Question
Peng Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000
Peng Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 4 years and no salvage value. Peng requires a 12% return on its investments. The factors for the present value of $1 for different periods follow:
Calculate the break-even time for this equipment.
-Break-even time is between 1 and 2 years.
-Break-even time is longer than 4 years.
-Break-even time is between 2 and 3 years.
-Break-even time is between 3 and 4 years.
-This project will never break-even.
I tried to calculate it but my answer didn't seem right! Can anyone explain this?
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