QS 11-15 Computation of break-even time LO A1

Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw materials to provide the customer a perfect fit. The new equipment costs $90,000 and is expected to generate an additional $35,000 in cash flows for five years. A bank will make a $90,000 loan to the company at a 10% interest rate for this equipments purchase. Use the following table to determine the break-even time for this equipment. All cash flows occur at year-end. (FV of $1,PV of $1,FVA of $1andPVA of $1)(Use appropriate factor(s) from the tables provided.)