A company wishes to buy new equipment for $16,000. The equipment is expected to generate an additional $4,800 in cash inflows for six years. All cash flows occur at year-end. A bank will make a $29,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine break-even time for this equipment: Year 1 2 23556N 4 Present Value of 1 at 10% Multiple Choice O 1.0000 0.9091 0.8264 0.7513. 0.6830 0.6209 0.5645 Break-even time is between two and three years. Break-even time is between three and four years. Break-even time is between four and five years. Break-even time is between five and six years. This project will never break-even
A company wishes to buy new equipment for $16,000. The equipment is expected to generate an additional $4,800 in cash inflows for six years. All cash flows occur at year-end. A bank will make a $29,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine break-even time for this equipment: Year 1 2 23556N 4 Present Value of 1 at 10% Multiple Choice O 1.0000 0.9091 0.8264 0.7513. 0.6830 0.6209 0.5645 Break-even time is between two and three years. Break-even time is between three and four years. Break-even time is between four and five years. Break-even time is between five and six years. This project will never break-even
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company wishes to buy new equipment for $16,000. The equipment is expected
to generate an additional $4,800 in cash inflows for six years. All cash flows occur
at year-end. A bank will make a $29,000 loan to the company at a 10% interest rate
so that the company can purchase the equipment. Use the table below to
determine break-even time for this equipment:
Year
28123456
Present Value of 1
at 10%
Multiple Choice
1.0000
0.9091
0.8264
0.7513
0.6830
0.6209
0.5645
Break-even time is between two and three years.
Break-even time is between three and four years.
Break-even time is between four and five years.
Break-even time is between five and six years.
This project will never break-even.
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