An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded.
Fill out the table in 1a completely, even after the payback period is reached.
1. a.
Initial investment:
Net Cash Cumulative Net Net Cash Cumulative Net
Flow Cash Flows Flow Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
The Sound Cellar magazine achieves payback in
The Pro Gamer magazine achieves payback in
magazine is recommended, based on the cash payback period.
1. b.
Present
Value of Sound Pro Sound Pro
$1 at 10% Cellar Gamer Cellar Gamer
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Amount to be invested
Net present value
magazine is recommended, based on its higher net present value.
2.
[Key essay answer here]
Problem 25(10)-2B
Name:
Section:
0%
Score:
Key Code:
[Key code here]
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Instructions
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Net Present Value Analysis
An asterisk (*) will appear to the right of an incorrect entry. The essay answer will not be graded.
Fill out the table in 1a completely, even after the payback period is reached.
1. a.
Net Cash Cumulative Net Net Cash Cumulative Net
Flow Cash Flows Flow Cash Flows
Year 1 65,000$ 65,000$ 70,000$ 70,000$
1. b.
Present
Value of Sound Pro Sound Pro
$1 at 10% Cellar Gamer Cellar Gamer
Year 1 0.909 65,000$ 70,000$ 59,085$ 63,630$
2.
Score:
Instructions
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Problem 25(10)-2B
Name:
Solution
Section:
Net Present Value Analysis
ON
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The report can take many forms and should include, as a minimum, the following points:
a. Both products offer the same total net cash flow.
d. Both products provide a positive net present value. This means both products would be
acceptable, since they exceed the minimum rate of return.
The report can take many forms and should include, as a minimum, the following points:
a. Both products offer the same total net cash flow.
b. Both products offer the same cash payback period.
c. Because of the timing of the receipt of the net cash flows, the Pro Gamer magazine offers a