If we need a 2-year payback on our investment in a property that has a $1.5...
If we need a 2-year payback on our investment in a property that has a $1.5 million annual revenue and we charge 5% of total revenue, what is the maximum amount of money we can invest in this property?
Homework Answers
The cash inflow from this investment = Revenue× %charged
=1.5×5%
= $0.075 million.
Initial Cash outflow= ? = Co
Payback period= 2
Payback period = initial cash outflow/cash inflow
2= Co/0.075
Co= $0.15 million.
The maximum amount we can invest in this property is $0.15 million.
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