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Bower CoIs Reviewing a Capital Investment of $50,000 CUsing the Results in (A)and (B)make a Recommendation for the Cash

question 70

Essay

Bower Co.is reviewing a capital investment of $50,000.This project's projected cash flows over a five-year period are estimated at $20,000 each year.
Required:
a.Calculate the payback period.
b.Calculate the break-even time.Assume a 12% hurdle rate and use the table below:

PresentValuePeriods of 1 at 12 %10.892920.797230.711840.635550.5674\begin{array} { lc } &\text{Present}\\&\text{Value}\\\underline{\text{Periods }}&\underline{\text{of 1 at 12 \%}} \\1&0.8929 \\2&0.7972 \\3&0.7118 \\4&0.6355 \\5&0.5674\end{array}
c.Using the results in (a)and (b)make a recommendation for the project.

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