Lifestyle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows:

Each product requires an investment of $320,000. A rate of 10% has been selected for the net present value analysis.
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 1).

2.  Prepare a brief report advising management on the relative merits of each of the two products.

Exhibit 1:

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At Home Chef $170,000 Music Beat Year $140,000 1 150,000 180,000 3 90,000 100,000 55,000 60,000 4 25,000 $500,000 30,000 $500,000 5 Total Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 0.507 0.432 0.335 0.665 0.513 0.452 0.376 0.279 0.627 0.467 0.404 0.327 0.233 9. 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162