Question

Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $250,000 and will yield the following expected cash flows. Management requires investments to have a payback period of three years, and it requires a 10% return on investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Period	Cash Flow
1		$	47,000
2			52,000
3			75,000
4			94,000
5			125,000

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.

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

• Required 1

• Required 2
• Required 3

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

	Year Cash inflow (outflow) Cumulative Net Cash Inflow (outflow) 0 $(250,000) 1 2 0 3 0 4 0 5 0 0 Payback period =

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

	Year Cash inflow (outflow) Table factor Present Value of Cash Flows Cumulative Present Value of Cash Flows 0 $(250,000) 1 2 0 3 0 4 0 5 0 0 Break-even time =

Determine the net present value for this investment.

	Net present value

Answer 1

Answer to Requirement 3.

Net Present Value = PV of Cash Inflow - Initial Investment
Net Present Value = $33,864