Problem 4-33 Growing Annuity Southern California Publishing Company is trying to decide whether to revise its popular textbook Financial Psychoanalysis Made Simple. The company has estimated that the revision will cost $75,000. Cash flows from increased sales will be $21,200 the first year. These cash flows will increase by 3 percent per year. The book will go out of print four years from now. Assume that the initial cost is paid now and revenues are received at the end of each year. If the company requires a return of 8 percent for such an investment, calculate the present value of the cash inflows of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Problem 4-33 Growing Annuity Southern California Publishing Company is trying to decide whether to revise its popular textbook Financial Psychoanalysis Made Simple. The company has estimated that the revision will cost $75,000. Cash flows from increased sales will be $21,200 the first year. These cash flows will increase by 3 percent per year. The book will go out of print four years from now. Assume that the initial cost is paid now and revenues are received at the end of each year. If the company requires a return of 8 percent for such an investment, calculate the present value of the cash inflows of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 5P: EQUIVALENT ANNUAL ANNUITY Corcoran Consulting is deciding which of two computer systems to purchase....

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33. Growing Annuity Southern California Publishing Company is trying to decide whether or not to revise its popular textbook Financial Psychoanalysis Made Simple. It has estimated that the revision will cost $155,000. Cash flows from increased sales will be $43,000 the first year. These cash flows will increase by 5.5 percent per year. The book will go out of print five years from now. Assume that the initial cost is paid now and revenues are received at the end of each year, If the company requires a return of 11 percent for such an investment, should it undertake the revision?
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