80.2K

Verified Solution

Link Copied!

Problem 24-6A Payback period, break-even time, and net present value LO P1, A1

Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $265,000 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 its 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		$	123,100
2			92,300
3			70,800
4			53,000
5			48,700

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

	Year Cash inflow (outflow) Cumulative Net Cash Inflow (outflow) 0 $(265,000) 1 2 3 4 5 Payback period =

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

	Year Cash inflow (outflow) Table factor Present Value of Cash Flows Cumulative Present Value of Cash Flows 0 $(265,000) 1 2 0.8264 3 0.7513 4 0.6830 5 0.6209 Break-even time =

Determine the net present value for this investment.

	Net present value

Answer & Explanation Solved by verified expert

See Answer