Question
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $254,000 and will yield the
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $254,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 4 years, and it requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the table provided.)
Period | Cash Flow | |||
1 | $ | 48,600 | ||
2 | 53,200 | |||
3 | 76,800 | |||
4 | 95,100 | |||
5 | 126,200 | |||
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.
Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your break-even time answer to 1 decimal place.) Year Cash inflow (outflow) | $ (254,000) 48,600 Present Value of Cumulative Table factor Present Value of Cash Flows Cash Flows 1.0000 $ (254,000) $ (254,000) 0.9091 $ 44,182 (209,818) 0.8264 $ 43,964 (165,854) 0.7513 $ 57,700 (108,154) 0.6830 64,953 (43,201) 0.6209 $ 78,358 35,157 53,200 76,800 95,100 126,200 145,900 Calculate the break even time: Break-even time occurs between year: and year: Break-even time =Step by Step Solution
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