Question

In: Accounting

Sentinel Company is considering an investment in technology to improve its operations. The investment will require...

Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $247,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 2 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 table provided.) Period Cash Flow 1 $ 48,200 2 53,200 3 75,900 4 94,600 5 126,800 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 $(247,000)
1 0
2 53,200 53,200
3 75,900 129,100
4 94,600 223,700
5 126,800 350,500
$103,500
Calculate the payback period:
Payback occurs between year: 4 and year: 4
Calculate the portion of the year:
Numerator for partial year $247,000 1.4 years
Denominator for partial year $177,300
Payback period = 0.7 years

etermine 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 $(247,000)
1 48,200 0.9090 $43,814
2 53,200 0.8260 $43,943
3
4 0
5 0
0
Break-even time =

Determine the net present value for this investmen

Determine the net present value for this investmen

Solutions

Expert Solution

Year

Cash inflow (outflow)

Cumulative Net Cash Inflow (outflow)

0

($247,000)

($247,000)

1

48200

($198,800)

2

53,200

($145,600)

3

75,900

($69,700)

4

94,600

$24,900

5

126,800

$151,700

$151,700

Calculate the payback period:

Payback occurs between year:

3

And year:

4

Calculate the portion of the year:

Numerator for partial year

$69,700

1.4

Years

Denominator for partial year

$94,600

Portion of forth year (69700/94600)

0.7

Payback period (3+0.7)

3.7

Years

Year

Cash inflow (outflow)

Table factor @10%

Present Value of Cash Flows

Cumulative Present Value of Cash Flows

0

($247,000)

1

($247,000)

($247,000)

1

48,200

0.909

$43,814

($203,186)

2

53,200

0.826

$43,943

($159,243)

3

75,900

0.751

$57,001

($102,242)

4

94,600

0.683

$64,612

($37,630)

5

126,800

0.621

$78,743

$41,113

Break even time between

Year 4

And

Year 5

Numerator for partial year

$37,630

Denominator for partial year

$78,743

Portion in fifth year (37630/78743)

0.5

Break-even time = 4+0.5

4.5

Years

Net present value of investment (Cumulative Present Value of Cash Flows at end of 5th year)

$41,113


Related Solutions

Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $257,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 9% return on 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 $ 47,400 2 52,300 3 75,600 4 94,800...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $257,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 9% return on 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 $ 47,400 2 52,300 3 75,600 4 94,800...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $247,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 2 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 table provided.) Period Cash Flow 1 $ 48,200 2 53,200 3 75,900 4 94,600...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $247,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 2 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 table provided.) Period Cash Flow 1 $ 48,200 2 53,200 3 75,900 4 94,600...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $245,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 4 years, and it requires a 8% return on 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 $ 47,900 2 52,800 3 76,000 4 94,100...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $245,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 8% return on 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 $ 47,500 2 52,100 3 75,800 4 94,500...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $259,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 9% return on 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 $ 48,500 2 52,300 3 76,100 4 95,600...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $257,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 8% return on 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 $ 48,500 2 52,900 3 75,900 4 94,700...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $253,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 7% return on 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 $ 47,900 2 53,400 3 76,700 4 95,700...
Sentinel Company is considering an investment in technology to improve its operations. The investment will require...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT