Elena Wallace invested $150,000 in a project that pays her an even amount per year for 10 years.The payback period is 6 years.What are Elena's yearly cash inflows from the project?

Question

Quizplus · Accepted Answer

Since the payback period is 6 years and the project pays an even amount per year for 10 years, Elena will receive 6 years of cash inflows equal to the amount of her initial investment, which is $150,000.

To determine the yearly cash inflows for the remaining 4 years, we can use the formula:

Yearly Cash Inflow = (Total Cash Inflow - Initial Investment) / Remaining years

Total Cash Inflow = Annual Cash Inflow x Number of Years

We know that Total Cash Inflow = Annual Cash Inflow x 10, and Initial Investment = Annual Cash Inflow x 6.

So, substituting these values into the formula above, we get:

Annual Cash Inflow = (Annual Cash Inflow x 10 - Annual Cash Inflow x 6) / 4

Simplifying the right side of the equation, we get:

Annual Cash Inflow = (4 x Annual Cash Inflow) / 4

Annual Cash Inflow = $25,000

Therefore, Elena's yearly cash inflows from the project are $25,000.

Elena Wallace Invested $150,000 in a Project That Pays Her