Southern California Publishing Company is trying to decide whether to revise itspopular textbook, Financial Psychoanalysis Made Simple. The company hasestimated that the revision will cost $80,000. Cash flows from increased sales willbe $21,800 the first year. These cash flows will increase by 3 percent per year. Thebook will go out of print four years from now. Assume that the initial cost is paidnow and revenues are received at the end of each year.If the company requires a return of 8 percent for such an investment, calculate thepresent value of the cash inflows of the project. (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)

Present value of cash inflows = Cash flows * Present value factor @ 8%.Cash flows :Year 1 =…

Answered: Southern California Publishing Company…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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