FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Payback Period
Each of the following scenarios is independent. Assume that all
- Colby Hepworth has just invested $525,000 in a book and video store. She expects to receive a cash income of $120,000 per year from the investment.
- Kylie Sorensen has just invested $1,700,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $850,000, $510,000, and $340,000.
- Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year.
- Rahn Booth invested $1,300,000 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
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- Ashviniarrow_forwardNikularrow_forwardYou have a chance to invest in a shopping center. The total investment for the purchase of the land and construction of the center is $10,000,000 today. You have calculated the yearly net after tax cash flows from operations as follows: Year 1: $1,500,000 Year 2: 2,000,000 Year 3: 2,250,000 Year 4: 2,500,000 Year 5: 2,750,000 At the end of year 5 you will sell the shopping center for $18,000,000 after taxes. Required: |+ Use the provided Excel spreadsheet to calculate the present value of all the operating after-tax cash flows and the total cash flows for the project assuming you require an 20% R.O.I. Use the attached "PRESENT VALUE TABLE" for your calculations:arrow_forward
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