Cash payback period, net present value method, and analysis OBJ. 2, 3 for a service company Social
Question:
Cash payback period, net present value method, and analysis OBJ. 2, 3 for a service company Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows:
Year Sound Cellar Pro Gamer 1 $ 65,000 $ 70,000 2 60,000 55,000 3 25,000 35,000 4 25,000 30,000 5 45,000 30,000 Total $220,000 $220,000 Each product requires an investment of $125,000. A rate of 10% has been selected for the net present value analysis.
Instructions 1. Compute the following for each product:
a. Cash payback period.
b. The net present value. Use the present value of $1 table appearing in this chapter
(Exhibit 2).
2. Prepare a brief report advising management on the relative merits of each of the two products.
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