Managerial Accounting Quiz 65.pdf - 30 Award 10.00 points...

30.
Award: 10.00 points Problems? Adjust credit for all students.
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)
x PV Factor = Present Value
Cumulative
Present Value
of Inflow
(Outflow)
0 (90,000)
1.0000
=
1 35,000
0.9091
=
31,819 (58,181)
2 35,000
0.8264
=
28,924 (29,257)
3
0.7513
=
(2,961)
4
0.6830
=
20,944
5
0.6209
=
42,676
3.2
x
$ (90,000)
$ (90,000)
x
x
35,000 x
26,296
35,000 x
23,905
35,000 x