The table below shows the costs and savings associated with a project. In which of the following years does the project break even?
A) Year 2.
B) Year 3.
C) Year 4.
D) The project does not pay back within the four year period.

Question

The table below shows the costs and savings associated with a project. In which of the following years does the project break even? 
A) Year 2. 
B) Year 3. 
C) Year 4. 
D) The project does not pay back within the four year period.

Quizplus · Accepted Answer

To find the break-even year, we need to find the year in which the total costs equal the total savings. In year 1, the total cost is $20,000 and the total savings are $10,000, resulting in a loss of $10,000. In year 2, the total cost is $15,000 + $10,000 = $25,000 and the total savings are $20,000, resulting in a loss of $5,000. In year 3, the total cost is $10,000 + $5,000 + $10,000 = $25,000 and the total savings are $30,000, resulting in a profit of $5,000. Therefore, the project breaks even in year 3.

The Table Below Shows the Costs and Savings Associated with a Project