a. Colby Hepworth has just invested $400,000 in a book and video store. She expe

Question

a. Colby Hepworth has just invested $400,000 in a book and video store. She expects to recieve a cash income of $120,000 per year from the investment. b. Kylie Sorensen has just invested $1,400,000 in a new biomedical technology. She expects to receive the following cash flows over the next five years: $350,000, $490,000, $700,000, $420,000, and $280,000. c. Carsen Nabors invested in a project that has a payback period of four years, The project brings in $960,000 per year. d. Rahn Booth invested $1,300,000 in a project that pays him an even amount per year for five yaers. the payback period is 2.5 years. 1. What is the Payback period for Colby? 2. What is the payback period for Kylie? 3. How much did Carsen invest in the project? 4. How much cash does Rahn receive each year?

Explanation / Answer

Part 1 Original investment $400,000 Annual cash flow $120,000 Payback period 3.3 Part 2 What is the payback period in years? 2.8 Part 3 Annual cash flow $960,000 Payback period (in years) 4.0 Investment $3,840,000 Part 4 Investment $1,300,000 Payback period (in years) 2.5 Annual cash flow $520,000

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