Southern California Publishing Company is trying to decide whether to revise its popular textbook, Financial Psychoanalysis...
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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 $80,000. Cash flows from increased sales will be $20,200 the first year. These cash flows will increase by 4 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. |
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If the company requires a return of 10 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.) |
Homework Answers
Answer:
| Year | Cash flow | PVF@10% | Present value |
| 1 | $20,200 | 0.909 | $18,361.8 |
| 2 | $21008 | 0.826 | $17,352.608 |
| 3 | $21848.32 | 0.751 | $16,408.08832 |
| 4 | $22722.2528 | 0.683 | $15,519.2986624 |
| 5 | $23631.142912 | 0.621 | $14,674.939748352 |
| present value of cash inflows | = | $82,316.734730752 | |
Present value of cash inflows = $82,316.73
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Southern California Publishing Company is trying to decide
whether to revise its popular textbook, Financial
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