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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
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 $110,000 and is expected to generate an additional $40,000 in cash flows for 5 years. A bank will make a $110,000 loan to the company at a 10% interest rate for this equipment's purchase. Use the following table to determine the break-even time for this equipment. All cash flows occur at year-end. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Cumulative net cash outflows must be entered with a minus sign. Round your present value factor to 4 decimals. Round your answers to whole dollars. Round "Break even time" answer to 1 decimal place.) Chart Values are Based on: = % Year Cash Inflow (Outflow) ? PV Factor Present Value Cumulative Present Value of Inflow (Outflow) 0 $ 1.0000 = GA (110,000) $ (110,000) 1 (110,000) 40,000 40,000 II 3 II 4 1111 5
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