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Why WOIR 26 QS 26-17 Computation of break-even time LO A1 1.07 points 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 $181.000 and is expected to generate an additional $110.000 in cash flows for 5 years. A bank will make a $181,000 loan to the company at a 15% 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.) ebook Hint Chart Values are based on: Print % References Year Cash Inflow (Outflow) PV Factor Present Value Cumulative Present Value of Inflow (Outflow) 0 $ 1.0000/= $ (181,000) $ (181,000) 1 (181,000) 110.000 110.000 x = 2 3 4 5 = Check my work 27 Exercise 26-18 Comparing payback and BET LO P1, A1 1.07 points 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 $99.000 and is expected to generate an additional $38.000 in cash flows for five years. A bank will make a $99.000 loan to the company at a 15% interest rate for this equipment's purchase. Compute the recovery time for both the payback period and break-even time. (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) ebook Print Complete this question by entering your answers in the tabs below. References Payback Period Break even time Compute the recovery time for the break-even time. (Cumulative net cash outflows must be entered with a mini your Break-even time answer to 1 decimal place.) Chart Values are based on: % i = Year Cash Inflow (Outflow) x PV Factor = Present Value Cumulative Present Value of Inflow (Outflow) 0 S 1.0000/= $ $ (99,000) (99,000) 38.000 x 38.000 x (99.000) (99,000) 1 2 3 4 5

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