At the beginning of year 1, Northern Sun, Inc., a food processing concern, is considering a new line of frozen entrees. The accompanying table shows projected cash outflows and inflows. Assume that all inflows and outflows are end- of- period payments.

Required:
The company’s cost of capital is 10 percent. Compute the following:
a. Net present value.
b. Payback.

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Cash Outllows ($000s) Inirial Investment Year 1 $(200) Year 2 Year 3 YearYear 5 Packaging and design Product testing Marketing Distribution Cash inflow Net cash flows (55) (50) (10) (50) (100) S (15 $10) (10) (50) (30) 100 (50) S(355) $190 $240 $190