Payback and discounted cash flow analysis Mr. and Mrs. Booble are looking for some income property in which to invest their savings. They have located a duplex that is rented for $19,000 per year. The asking price is $85,000. Their lawyer has agreed to handle the legal expenses for 4 percent of the asking price. Various fees and other closing costs to purchase the property are estimated at $2,600. The owner of the property has provided figures which indicate that annual maintenance for the property is $2,300 and property taxes are $1,400 per year. In addition, $300 of miscellaneous expenses are usually incurred each year. The property has a useful life of 25 years and the buyers plan to use straight-line depreciation. They have decided that they must have a return of at least 14 percent on their investment.

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REQUIRED a. Compute the payback on the investment. b. Compute the payback reciprocal. c. Find the net present value of the investment. d. Compute the profitability index. e. Find the internal rate of return rounded to one decimal point.