A company wishes to buy new equipment for $85,000. The equipment is expected to generate an additional $35,000 in cash inflows for four years. All cash flows occur at year-end. A bank will make an $85,000 loan to the company at a 10% interest rate so that the company can purchase the equipment. Use the table below to determine break-even time for this equipment.
year Present Value of 1 at 10%
0 1.0000
1 0.9091
2 0.8264
3 0.7513
4 0.6830