Sentinel Company is considering an investment in technology to improve its opera

Question

Sentinel Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of $249,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 4 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 $ 47,100 2 52,500 3 75,700 4 94,400 5 125,700 Required: 1. Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place.) 2. Determine the break-even time for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place. Round all dollar amounts to nearest whole number.) 3. Determine the net present value for this investment

The part I'm not understanding is for number 1:   How do I calculate the cash inflow(outflow) for years 0-5 and what is the cumulative Net Cash Inflow(Outflow)

Explanation / Answer

a b c d e Year Cashflow PV Factor PV of Cashflows (a*b) Cumulative Cashflows at pV terms (c) Cumulative Cash flows (b) 0 -249000 1 -249000 -249000 -249000 1 47100 0.934579 44018.69 -204981 -201900 2 52500 0.873439 45855.53 -159126 -149400 3 75700 0.816298 61793.75 -97332 -73700 4 94400 0.762895 72017.31 -25314.7 20700 5 125700 0.712986 89622.36 64307.64 146400 NPV 64307.64 Pay Back Period = 3 years + (73700/(73700+207000)*365 = 3 years 96 days Break even period = 4 years + (25314.70/(25314.70+64307.64)*365 = 4 years 103 days

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