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 $255,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 2 years, and it requires a 8% return on investments. (PV of $1. FV of $1. FVA of $1. and FVA of $1) (Use appropriate factor(s) from the table provided.) Required: Determine the payback period for this investment. (Enter cash outflows with a minus sign. Round your Payback Period answer to 1 decimal place.) Payback period= 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.) Break-even= Determine the net present value for this investment. Net present value=

Explanation / Answer

Year Cash Flows Cummulative CF 1 48100 48100 2 52500 100600 3 76300 176900 4 95800 272700 5 125900 398600 Year Cash Flows PVF @ 8% PV Cummulative PV of Cf 0 -255000 1 -255000 1 48100 0.926 44537 44537 2 52500 0.857 45010 89547 3 76300 0.794 60569 150117 4 95800 0.735 70416 220533 5 125900 0.681 85685 306218 51218 Breakeven payback period 4 year + (306218-255000)/306218 4.17 Year Cash Flows PVF @ 8% PV 0 -255000 1 -255000 1 48100 0.926 44537 2 52500 0.857 45010 3 76300 0.794 60569 4 95800 0.735 70416 5 125900 0.681 85685 Year Cash Flows PVF @ 8% PV 0 -255000 1 -255000 1 48100 0.926 44537 2 52500 0.857 45010 3 76300 0.794 60569 4 95800 0.735 70416 5 125900 0.681 85685 NPV 51218

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