Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes.
The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw
materials to provide the customer a perfect fit. The new equipment costs $90,000 and is expected to generate an additional $35,000
in cash flows for five years. A bank will make a $90,000 loan to the company at a 10% interest rate for this equipment's purchase. Use
the following table to determine the break-even time for this equipment. All cash flows occur at year-end. (PV of $1, FV of $1, PVA of $1,
and FVA of $1) (Use appropriate factor(s) from the tables provided. Cumulative net cash outflows must be entered with a minus
sign. Round your present value factor to 4 decimals. Round your answers to whole dollars. Round \"Break even time\" answer to 1
decimal place.)
Chart Values are Based on:
i= 10%
Year
Cash Inflow
(Outflow)
PV
Factor
Present
Value
Cumulative
Present
Value of
Inflow
(Outflow)
0
1
2
3
4
5
$ (90,000) x
35,000 x
1.0000 = $ (90,000) $ (90,000)
0.9434 =
35,000 x
=
