Question
Outdoor Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: Year Hiking Kayaking 1 $109,000
Outdoor Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows:
| Year | Hiking | Kayaking |
|---|---|---|
| 1 | $109,000 | $91,000 |
| 2 | 89,000 | 79,000 |
| 3 | 77,000 | 28,000 |
| 4 | 70,000 | 51,000 |
| 5 | 21,000 | 117,000 |
| Total | $366,000 | $366,000 |
Each product requires an investment of $198,000.
Required:
1. Compute the cash payback period for each project.
| Project | Cash Payback Period |
|---|---|
| Hiking | 1 year2 years3 years4 years5 years |
| Kayaking | 1 year2 years3 years4 years5 years |
2.
a.
HikingKayakingBoth products
offer(s) the same total net cash flows.
b. fill in the blank 1 of 2
CyclingHikingBoth products
offers fill in the blank 2 of 2
a longera shorter
cash payback period by 1 year.
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Financial Management Principles and Applications
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin
13th edition
134417216, 978-0134417509, 013441750X, 978-0134417219
