In which year does an investment break even, given the following costs and benefits?

The determination of when an investment breaks even depends on the cumulative costs and benefits over time. Break-even occurs when the total benefits equal the total costs incurred up to a certain year.

If the correct answer is that the investment breaks even in Year 4, this suggests that by the end of Year 4, the total benefits generated from the investment have finally matched the total costs invested up to that point. This indicates that prior to Year 4, either the costs were higher than the benefits or the benefits did not accumulate sufficiently to cover the costs.

In this scenario, it means that in Years 1 through 3, the investment had not generated enough returns to offset the total expenditures. Therefore, the break-even point is reached only when the accumulated benefits continue to grow, surpassing the expenses that have been accounted for earlier.

This type of analysis is crucial for businesses in evaluating the viability and timing of investments, which helps to inform future decision-making and financial planning.