Question

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 $102,000 and is expected to generate an additional $41,000 in cash flows for five years. A bank will make a $102,000 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.)Complete this question by entering your answers in the tabs below.

Payback PeriodBreak even time
Compute the recovery time for the payback period.

Payback Period
Choose Numerator:   /   Choose Denominator:   =   Payback Period
/ =    years

omplete this question by entering your answers in the tabs below.

Payback PeriodBreak even time
Compute the recovery time for the break-even time. (Cumulative net cash outflows must be entered with a minus sign. Round 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 $(102,000) x    1.0000   = $(102,000) $(102,000)
1 =      
2    =      
3 =      
4 =      
5    =      
       

Answer 1

If find the answer useful please like the answer Payback Period = Initial Investment / Annual Cash flow 102,000 41,000 Payback Period = 2.49 (i.e. 2 years and 6 months) Year PV factor Present Value Cash inflow (outflow) 0 (102,000) 41,000 41,000 41,000 41,000 41,000 2 3 4 Cumulative Present value (102,000) (102,000) 35,652 (66,348) 31,002 (35,346) 26,958 (8,388) 23,442 15,054 20,384 35,438 1 0.8696 0.7561 0.6575 0.5718 0.4972 5 Break Even year= 3 Years + Balance amount to be recover 4 th year PV cash flow Break Even year= 3 Years + (8.388) 23,442 Break Even year= 3 Years + (0.36) Break Even year= 3 Years and 4 months