Problem 24-6A Payback period, break-even time, and net present value LO P1, A1

Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $265,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 4 years, and it requires a 10% return on its 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 $ 123,100
2 92,300
3 70,800
4 53,000
5 48,700

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.

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

Year Cash inflow (outflow) Cumulative Net Cash Inflow (outflow)
0 $(265,000)
1
2
3
4
5
Payback period =
Determine the break-even time for this investment. (Round your Payback Period answer to 1 decimal place. Enter cash outflows with a minus sign.)

Year Cash inflow (outflow) Table factor Present Value of Cash Flows Cumulative Present Value of Cash Flows
0 $(265,000)
1
2 0.8264
3 0.7513
4 0.6830
5 0.6209
Break-even time =
Determine the net present value for this investment.

Net present value