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 3 years, and it requires a 9% return on investments. (PV of $1,
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 3 years, and it requires a 9% return on investments. (PV of $1,
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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 3 years, and it requires a 9%
| Period | Cash Flow | |||
| 1 | $ | 47,400 | ||
| 2 | 52,200 | |||
| 3 | 75,500 | |||
| 4 | 95,100 | |||
| 5 | 126,000 | |||
Required:
1. Determine the payback period for this investment.
2. Determine the break-even time for this investment.
3. Determine the
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
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.)
Cumulative
Present Value of
Cash Flows
Cash inflow
Present Value of
Cash Flows
Year
Table factor
(outflow)
(250,000)
3.
4
0.
Break-even time =
<Required 1
Required 3 >
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Transcribed Image Text: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.)
Cash inflow
Cumulative Net Cash
Inflow (outflow)
Year
(outflow)
(250.000)
2.
3.
0.
4.
Payback period =
Required 2 >
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