A small business needs to purchase PAD system pattern-making (PAD) software. PAD charges $6,450 for a...
A small business needs to purchase PAD system pattern-making (PAD) software. PAD charges $6,450 for a single-seat V6.0 lifetime license, plus a $1,500 per year maintenance fee for that license. The small business estimates that it will make an additional $2,790 per year in revenues due to the purchase of this software. How many years will it take for the small business to break-even on the purchase given these cash flows?
Homework Answers
Answer
break-even is at total revenue is equal to the total cost
n=number of years
total cost =fixed cost + variable cost
=6450+n* 1500
total revenue =n*2790
breakeven is:
2790n=6450+1500n
1290n=6450
n=5
it will take 5 years to break even.
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