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Payback Period Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. 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. b. Kylie Sorensen has just invested $1,460,000 in a new biomedical technology. She expects to receive the following cash flows over the next 5 years: $350,000, $490,000, $730,000, $430,000, and $300,000. c. Carsen Nabors invested in a project that has a payback period of 4 years. The project brings in $960,000 per year. d. Rahn Booth invested $1,600,000 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. 2.96 x years 2. What is the payback period for Kylie? Round your answer to one decimal place. 2.96 x years 3. How much did Carsen invest in the project? $ 4. How much cash does Rahn receive each year? $ per year Feedback Net Present Value and Competing Projects For discount factors use Exhibit 123.1 and Exhibit 120.2. Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two local manufacturers of this equipment are being considered as sources of the equipment. After-tax cash inflows for the two competing projects are as follows: Year 1 Puro Equipment $320,000 280,000 240,000 160,000 120,000 Briggs Equipment $120,000 120,000 320,000 2 3 4 400,000 5 440,000 Both projects require an initial investment of $560,000. In both cases, assume that the equipment has a life of 5 years with no salvage value. $ Required: Round present value calculations and your final answers to the nearest dollar. 1. Assuming a discount rate of 12%, compute the net present value of each piece of equipment. Puro equipment: Briggs equipment: 2. A third option has surfaced for equipment purchased from an out-of-state supplier. The cost is also $560,000, but this equipment will produce even cash flows over its 5-year life. What must the annual cash flow be for this equipment to be selected over the other two? Assume a 12% discount rate. per year $