Cash payback period, net present value method, and analysis for a service company PR 25-2B Obj. 2, 3 Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: EXCEL TEMPLATE Sound Cellar Year Pro Gamer $ 70,000 $65,000 1 2 60,000 55,000 25,000 35,000 4 25,000 30,000 45,000 $220,000 30,000 $220,000 Total 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). Answer 2. Prepare a brief report advising management on the relative merits of each of the two products. C D F J K M R S V W Problem 25(11)-2B 2 Name: Section: 5 Score: 0% 6 7 Key Code: [Key code here] Instructions 8 9 Answers are entered in the cells with gray backgrounds. 10 Cells with non-gray backgrounds are protected and cannot be edited. 11 An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded. 12 Fill out the table in 1A completely, even after the payback period is reached 13 1. A 14 Initial investment 15 16 17 Sound Cellar Pro Gamer Net Cash 18 Net Cash Cumulative Net Cumulative Net 19 Flow Cash Flows Cash Flows Flow 20 Year 1 21 Year 2 22 Year 3 23 Year 4 24 Year 5 25 26 27 The Sound Cellar magazine achieves payback in 28 29 The Pro Gamer magazine achieves payback in magazine is recommended, based on the cash payback period. 30 31 32 O z L C D E H J K L N P R U B. Net Present Value Analysis Present Value of Present Net Cash Flow Net Cash Flow Sound Sound Value of Pro Pro Cellar Cellar $1 at 10% Gamer Gamer Year 1 Year 2 Year 3 Year 4 Year 5 Total Amount to be invested Net present value magazine is recommended, based on its higher net present value. 2. Key essay answer here] Cash payback period, net present value method, and analysis for a service company PR 25-2B Obj. 2, 3 Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: EXCEL TEMPLATE Sound Cellar Year Pro Gamer $ 70,000 $65,000 1 2 60,000 55,000 25,000 35,000 4 25,000 30,000 45,000 $220,000 30,000 $220,000 Total 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). Answer 2. Prepare a brief report advising management on the relative merits of each of the two products. C D F J K M R S V W Problem 25(11)-2B 2 Name: Section: 5 Score: 0% 6 7 Key Code: [Key code here] Instructions 8 9 Answers are entered in the cells with gray backgrounds. 10 Cells with non-gray backgrounds are protected and cannot be edited. 11 An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded. 12 Fill out the table in 1A completely, even after the payback period is reached 13 1. A 14 Initial investment 15 16 17 Sound Cellar Pro Gamer Net Cash 18 Net Cash Cumulative Net Cumulative Net 19 Flow Cash Flows Cash Flows Flow 20 Year 1 21 Year 2 22 Year 3 23 Year 4 24 Year 5 25 26 27 The Sound Cellar magazine achieves payback in 28 29 The Pro Gamer magazine achieves payback in magazine is recommended, based on the cash payback period. 30 31 32 O z L C D E H J K L N P R U B. Net Present Value Analysis Present Value of Present Net Cash Flow Net Cash Flow Sound Sound Value of Pro Pro Cellar Cellar $1 at 10% Gamer Gamer Year 1 Year 2 Year 3 Year 4 Year 5 Total Amount to be invested Net present value magazine is recommended, based on its higher net present value. 2. Key essay answer here]