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 $109,000 and is expected to generate an additional $42,000 in cash flows for five years. A bank will make a $109,000 loan to the company at a 12% 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 EVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by entering your answers in the tabs below. Break even time Payback Period Compute the recovery time for the payback period. Payback Period Payback Period Choose Numerator: Choose Denominator: Payback period 0 Payback Period Break 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: % Cumulative Present ValuePresent Value of Inflow Cash Inflow Year PV Factor (Outflow) (Outflow) (109,000) (109,000) (109,000) X 0 1.0000 1 2 4 5 t LC
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 $109,000 and is expected to generate an additional $42,000 in cash flows for five years. A bank will make a $109,000 loan to the company at a 12% 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 EVA of $1) (Use appropriate factor(s) from the tables provided.) Complete this question by entering your answers in the tabs below. Break even time Payback Period Compute the recovery time for the payback period. Payback Period Payback Period Choose Numerator: Choose Denominator: Payback period 0 Payback Period Break 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: % Cumulative Present ValuePresent Value of Inflow Cash Inflow Year PV Factor (Outflow) (Outflow) (109,000) (109,000) (109,000) X 0 1.0000 1 2 4 5 t LC
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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 $109,000 and is expected to generate an additional $42,000
in cash flows for five years. A bank will make a $109,000 loan to the company at a 12% 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 EVA of $1) (Use
appropriate factor(s) from the tables provided.)
Complete this question by entering your answers in the tabs below.
Break even
time
Payback Period
Compute the recovery time for the payback period.
Payback Period
Payback Period
Choose Numerator:
Choose Denominator:
Payback period
0
Payback Period
Break even time>
Transcribed Image Text: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:
%
Cumulative
Present ValuePresent Value
of Inflow
Cash Inflow
Year
PV Factor
(Outflow)
(Outflow)
(109,000) (109,000)
(109,000) X
0
1.0000
1
2
4
5
t
LC
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