Question

Question Content AreaKate is considering an investment in a retail shopping mall. The initial investment is $630,000. She expects to receive cash income of $90,000 a year. What is the payback period? a.7 years b.12 years c.5 years d.2 years e.15 years

Answer 1

The payback period of making an investment in a retail shopping mall is 7 years.

Option A is the correct answer.

What is a payback period?

A payback period is one of the techniques of capital budgeting that tells about how much time the investment amount got recovered by the company.

Given values:

Cost of investment: $630,000

Yearly cash flows: $90,000

Computation of payback period of the retail investment:

$\rm\ Payback \rm\ Period=\frac{\rm\ Cost \rm\ of \rm\ Investment}{\rm\ Yearly \rm\ Cash \rm\ flows} \\\rm\ Payback \rm\ Period=\frac{\ 630,000}{\ 90,000} \\\rm\ Payback \rm\ Period=7\rm\ years$

Therefore, when the retail investment of $630,000 made with annual cash flows of $90,000 provides a payback period of 7 years.

Learn more about the payback period in the related link:

brainly.com/question/16255939

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