Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the break-even time (BET) period for this investment.
A) 2.85 years.
B) 2.57 years.
C) 3.17 years.
D) 2.98 years.
E) 3.62 years.

Question

Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. Compute the break-even time (BET) period for this investment. 
A) 2.85 years. 
B) 2.57 years. 
C) 3.17 years. 
D) 2.98 years. 
E) 3.62 years.

Quizplus · Accepted Answer

11eaadfd_cc70_ffe7_95d8_893d25f2c771_TB6948_00 Paid back in year 4 = 4,284/$23,905 = 0.17; Payback period = 3 + 0.17 = 3.17 years

Nestor Company Is Considering the Purchase of an Asset for $100,000