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

Question

Lenitnes Company is considering an investment in technology to improve its operations. The investment will require an initial outlay of 5264,000 and will yield the following expected cash flows. Management requires investments to have a payback period of 3 years, and it requires a 8% 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 5123,100 93,000 70.400 53,100 48.100 Required: 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 Year Cash Inflow outflow) outflow) $ (264,000) Payback period -

Explanation / Answer

Question - 1

Payback period of the Investment

Question - 2

Break even time = Discounted payback period = 3 years + 14501.88 / 39028.5 = 3.37 Years

Question - 3

NPV = 53860.48

The total of Present value of CF column gives the NPV. This value is taken from cummulative CF in the 5th year in above table ( question - 2 )

Year Cash inflow Cumulative 0 -264000 -264000 1 123000 -141000 2 93000 -48000 3 70400 22400 4 53100 5 43100 Payback period = 2 Years     + 48000/70400 = 2.68 Years

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.