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Sentinel Company is considering an investment in technology to improve its operations. The investment will require...

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Accounting

Sentinel Company is considering an investment in technology toimprove its operations. The investment will require an initialoutlay of $257,000 and will yield the following expected cashflows. Management requires investments to have a payback period of3 years, and it requires a 8% return on investments. (PV of $1, FVof $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)from the table provided.)

PeriodCash Flow
1$48,500
252,900
375,900
494,700
5126,900


Required:
1. Determine the payback period for thisinvestment.
2. Determine the break-even time for thisinvestment.
3. Determine the net present value for thisinvestment.

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

YearCash inflow (outflow)Cumulative Net Cash Inflow (outflow)
0$(257,000)
1
20
30
40
50
0
Payback period =

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

YearCash inflow (outflow)Table factorPresent Value of Cash FlowsCumulative Present Value of Cash Flows
0$(257,000)
1
2
30
40
50
0
Break-even time =

Determine the net present value for this investment.

Netpresent value

Answer & Explanation Solved by verified expert
4.4 Ratings (691 Votes)
1 Payback Period 38 Years Year Cash Inflow Cumulative Net Cash Inflow 0 257000 257000 1 48500 208500 2 52900 155600 3 75900 79700 4 94700 15000 5 126900 141900 Payback occurs between year 3 and year 4 Portion of the Year Unrecovered investment 79700 08 Years    See Answer
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Transcribed Image Text

Sentinel Company is considering an investment in technology toimprove its operations. The investment will require an initialoutlay of $257,000 and will yield the following expected cashflows. Management requires investments to have a payback period of3 years, and it requires a 8% return on investments. (PV of $1, FVof $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)from the table provided.)PeriodCash Flow1$48,500252,900375,900494,7005126,900Required:1. Determine the payback period for thisinvestment.2. Determine the break-even time for thisinvestment.3. Determine the net present value for thisinvestment.Determine the payback period for this investment. (Enter cashoutflows with a minus sign. Round your Payback Period answer to 1decimal place.)YearCash inflow (outflow)Cumulative Net Cash Inflow (outflow)0$(257,000)1203040500Payback period =Determine the break-even time for this investment. (Enter cashoutflows with a minus sign. Round your break-even time answer to 1decimal place.)YearCash inflow (outflow)Table factorPresent Value of Cash FlowsCumulative Present Value of Cash Flows0$(257,000)123040500Break-even time =Determine the net present value for this investment.Netpresent value

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