Nebraska Co. is reviewing a capital investment of $100,000. This project's projected cash flows over a five-year period are estimated at $35,000 each year.
Required:
(a) Calculate the payback period.
(b) Calculate the break-even time. Assume a 12% hurdle rate and use the table below:
Present Value
Periods of 1 at 12%
1…… 0.8929
2…… 0.7972
3…… 0.7118
4…… 0.6355
5…… 0.5674
(c) Using the results in (a) and (b), make a recommendation for the project.

Question

Quizplus · Accepted Answer

The Answer of Nebraska Co. is reviewing a capital investment of $100,000. This project's projected cash flows over a five-year period are estimated at $35,000 each year.
Required:
(a) Calculate the payback period.
(b) Calculate the break-even time. Assume a 12% hurdle rate and use the table below:
Present Value
Periods of 1 at 12%
1…… 0.8929
2…… 0.7972
3…… 0.7118
4…… 0.6355
5…… 0.5674
(c) Using the results in (a) and (b), make a recommendation for the project.