Question
A shoe manufacturer is evaluating new equipment that would custom fit athletic shoes. The new equipment costs $107,000 and will generate $42,000 in net cash flows for five years.
A shoe manufacturer is evaluating new equipment that would custom fit athletic shoes. The new equipment costs $107,000 and will generate $42,000 in net cash flows for five years.
Determine the break-even time for this equipment.
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Koala Tutor
Koala Ai Support
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The break-even time is the point at which the revenue generated by the equipment equals the cost of the equipment.
To calculate this, divide the cost of the equipment by the annual net cash flow:
$107,000 / $42,000 = 2.55 years
So, the break-even time for this equipment is approximately 2.55 years.
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