Payback Period
Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.
1. Colby Hepworth has just invested $475,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment.
2. Kylie Sorensen has just invested $1,620,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $810,000, $450,000, and $360,000.
3. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year.
4. Rahn Booth invested $1,450,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years.
Required:
1. What is the payback period for Colby? Round your answer to two decimal places.
__________years
2. What is the payback period for Kylie? Round your answer to one decimal place.
__________years
3. How much did Carsen invest in the project?
$__________
4. How much cash does Rahn receive each year?
$__________ per year