Question: Southern Ontario Publishing Company is trying to decide whether
Southern Ontario Publishing Company is trying to decide whether to revise its popular textbook, Introduction to Corporate Finance. The company has estimated that the revision will cost $50,000. Cash flows from increased sales will be $12,000 the first year. Theses cash flows will increase by 6% 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. If the company requires an 11% return for such an investment, should it undertake the revision?
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