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
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Ответ:
1. Payback period = 2.8 years
2. Break-even time = 3.8 years
3. NPV = $12,577
Explanation:
NOTE: See the attached excel file for the calculation tables.
1. Determine the payback period for this investment.
Payback period = 2 years and [(49,600 / 70,800) * 12] months = 2 years and 8 months approximately = 2.8 years.
2. Determine the break-even time for this investment.
Break-even time = 3 years and [(23,622 / 36,199) * 12] months = 3 years and 8 months approximately = 3.8 years
3. Determine the net present value for this investment.
Net present value (NPV) of this investment is $12,577
Ответ:
D - $15,300,000
Explanation: Weighted average is the summation of all data in a data set. The weighted average accumulated expenditures is the accumulation of expenditures for the period.
7/1 $3,000,000
9/1 $6,300,000
12/31 $6,000,000
Total of all figures = $15,300,000