Cash payback method: Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business. Net present value method: Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method . To determine: The cash payback period for the equipment.

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Cash Payback Period, Net Present Value Method, and Analysis for a Service CompanySocial Circle Publications Inc. is considering two new magazine products. The estimated net cash flowsfrom each product are as follows:Year Sound Cellar Pro Gamer1 $ 65,000 $ 70,0002 60,000 55,0003 25,000 35,0004 25,000 30,0005 45,000 30,000Total $220,000 $220,000Each product requires an investment of $125,000. A rate of 10% has been selected for the net presentvalue analysis.Present Value of $1 at Compound InterestYear 6% 10% 12% 15% 20%1 0.943 0.909 0.893 0.870 0.8332 0.890 0.826 0.797 0.756 0.6943 0.840 0.751 0.712 0.658 0.5794 0.792 0.683 0.636 0.572 0.4825 0.747 0.621 0.567 0.497 0.4026 0.705 0.564 0.507 0.432 0.3357 0.665 0.513 0.452 0.376 0.2798 0.627 0.467 0.404 0.327 0.2339 0.592 0.424 0.361 0.284 0.19410 0.558 0.386 0.322 0.247 0.162Required:3. PR.11-05B1a. Compute the cash payback period for each product.Cash Payback PeriodSound CellarPro Gamer1b. Compute the net present value. Use the present…

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Question

Chapter 26, Problem 26.2BPR

1. a.

To determine

Cash payback method:

Cash payback period is the expected time period which is required to recover the cost of investment. It is one of the capital investment method used by the management to evaluate the long-term investment (fixed assets) of the business.

Net present value method:

Net present value method is the method which is used to compare the initial cash outflow of investment with the present value of its cash inflows. In the net present value, the interest rate is desired by the business based on the net income from the investment, and it is also called as the discounted cash flow method.

To determine: The cash payback period for the equipment.

b.

To determine

To calculate: The net present value of the investment of SCP Incorporation.

2.

To determine

To prepare: A brief report for advising management on the relative merits of each project.

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Cash Payback Period, Net Present Value Method, and Analysis for a Service CompanySocial Circle Publications Inc. is considering two new magazine products. The estimated net cash flowsfrom each product are as follows:Year Sound Cellar Pro Gamer1 $ 65,000 $ 70,0002 60,000 55,0003 25,000 35,0004 25,000 30,0005 45,000 30,000Total $220,000 $220,000Each product requires an investment of $125,000. A rate of 10% has been selected for the net presentvalue analysis.Present Value of $1 at Compound InterestYear 6% 10% 12% 15% 20%1 0.943 0.909 0.893 0.870 0.8332 0.890 0.826 0.797 0.756 0.6943 0.840 0.751 0.712 0.658 0.5794 0.792 0.683 0.636 0.572 0.4825 0.747 0.621 0.567 0.497 0.4026 0.705 0.564 0.507 0.432 0.3357 0.665 0.513 0.452 0.376 0.2798 0.627 0.467 0.404 0.327 0.2339 0.592 0.424 0.361 0.284 0.19410 0.558 0.386 0.322 0.247 0.162Required:3. PR.11-05B1a. Compute the cash payback period for each product.Cash Payback PeriodSound CellarPro Gamer1b. Compute the net present value. Use the present…

Cash payback period, net present value method, and analysis Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows: Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis. Instructions 1. Compute the following for each product: a. Cash payback period. b. The net present value. Use the present value of $1 table appearing in this chapter (Exhibit 2). 2. Prepare a brief report advising management on the relative merits of each project.

Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follow: Year Sound Cellar Pro Gamer 1 65,000 70,000 2 60,000 55,000 3 25,000 35,000 4 25,000 30,000 5 45,000 30,000 Total 220,000 220,000 Each product requires an investment of $125,000. A rate of 10% has been selected for the net present value analysis. A. Calculate the payback period for the two products. B. Calculate the net present value for the two products.