Cash Payback Period, Net Present Value Method, and Analysis GWH Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: Year Primitive Camping Lakeside Fishing 1 $112,000 $93,000 2 91,000 110,000 3 79,000 75,000 4 71,000 53,000 5 23,000 45,000 Total $376,000 $376,000 Present Value of $1 at Compound Interest
Cash Payback Period, Net Present Value Method, and Analysis GWH Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: Year Primitive Camping Lakeside Fishing 1 $112,000 $93,000 2 91,000 110,000 3 79,000 75,000 4 71,000 53,000 5 23,000 45,000 Total $376,000 $376,000 Present Value of $1 at Compound Interest
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2PB
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Question
Cash Payback Period,
GWH Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows:
| Year | Primitive Camping | Lakeside Fishing | ||
| 1 | $112,000 | $93,000 | ||
| 2 | 91,000 | 110,000 | ||
| 3 | 79,000 | 75,000 | ||
| 4 | 71,000 | 53,000 | ||
| 5 | 23,000 | 45,000 | ||
| Total | $376,000 | $376,000 |
| Present Value of $1 at |
|||||
| Year | 6% | 10% | 12% | 15% | 20% |
| 1 | 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 |
| 5 | 0.747 | 0.621 | 0.567 | 0.497 | 0.402 |
| 6 | 0.705 | 0.564 | 0.507 | 0.432 | 0.335 |
| 7 | 0.665 | 0.513 | 0.452 | 0.376 | 0.279 |
| 8 | 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 |
Each product requires an investment of $203,000. A rate of 10% has been selected for the net present value analysis.
Required:
1a. Compute the cash payback period for each project.
| Cash Payback Period | |
| Primitive Camping |
|
| Lakeside Fishing |
|
1b. Compute the net present value. Use the present value of $1 table presented above. If required, use the minus sign to indicate a negative net present value.
| Primitive Camping | Lakeside Fishing | |||
| Present value of net cash flow total | $fill in the blank 3 | $fill in the blank 4 | ||
| Amount to be invested | fill in the blank 5 | fill in the blank 6 | ||
| Net present value | $fill in the blank 7 | $fill in the blank 8 |
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