Question

Apple invested $10,495 in the current year to expand its manufacturing capacity. Assume that these assets have a 10-year life and generate net cash flows of $3,000 per year, and that Apple requires a 7% return on its investments. (Apple $s in millions.) (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Compute break-even time. 2. Compute the net present value of this investment.

Answer 1

The breakeven time of the project is 3.50 years

The net present value of the project is $10,575.80

The requirement, in this case, is to determine the payback period(breakeven time) and the project's net present value.

The breakeven time means the number of years it takes to recoup the initial investment, and the number of years it would take for the annual cash flows to be the same as the initial investment, also known as the payback period.

Note for an investment that has even annual cash flows, breakeven time is the initial investment divided by the annual cash flow

breakeven time=$10,495/$3,000

breakeven time=3.50 years

The net present value is the present value of future cash flows for the 10 years minus the initial investment

PV of annual cash flow=annual cash flow*PVA of $1

From the table,7% for 10 years, would give PVA is 7.0236(PVA table, check 7% under year 10)

PV of cash flows=$3,000*7.0236

PV of cash flows=$ 21,070.80

NPV=$21,070.80- $10,495

NPV=$10,575.80

The computation of breakeven time and net present value can be further understood looking the below.

https://brainly.com/question/16999673

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