WEEK FOUR

Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $251,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 8% 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	$ 47,700
2	52,500
3	76,100
4	95,500
5	126,600

Required:
1.	Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place.)

Year	Cash inflow (outflow)	Cumulative Net Cash Inflow (outflow)
0	$(251,000)	$(251,000)
1	47,700	(203,300)
2	52,500	(150,800)
3	76,100	(74,700)
4	95,500	20,800
5	126,600	147,400
	$147,400
Calculate the payback period:
Payback occurs between year:		3	and year:	4
Calculate the portion of the year:
Numerator for partial year			0
Denominator for partial year
Payback period =		3.8	years

2. Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place. Round all dollar amounts to nearest whole number.)

Year	Cash inflow (outflow)	Table factor	Present Value of Cash Flows	Cumulative Present Value of Cash Flows
0	$(251,000)
1	47,700
2	52,500
3	76,100			0
4	95,500			0
5	126,600			0
		4		5
Calculate the portion of the year:
Numerator for partial year			0
Denominator for partial year
Break-even time =		4.4	years

3.	Determine the net present value for this investment.

Net present value

$54,945

PLEASE FILL IN THE BLANKS, ANSWER EACH QUESTION CORRECTLY.