Payback PeriodEach of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.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. years2. What is the payback period for Kylie? Round your answer to one decimal place. years3. How much did Carsen invest in the project?$4. How much cash does Rahn receive each year?$per year

payback period is the time taken by a project to recover its initial cash outlay. Payback period…

Answered: Each of the following scenarios is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Payback Period

Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows.

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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