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Question
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"u00a6"u00a6 0.8929
2"u00a6"u00a6 0.7972
3"u00a6"u00a6 0.7118
4"u00a6"u00a6 0.6355
5"u00a6"u00a6 0.5674
(c) Using the results in (a) and (b), make a recommendation for the project.
Answer
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