Family Life Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows:

Each product requires an investment of $440,000. A rate of 15% has been selected for the net present value analysis.

Instructions
1. Compute the following for each project:
a. Cash payback period.
b. The net present value. Use the present value of $1 table appearing in this chapter.
2. Prepare a brief report advising management on the relative merits of each of the twoproducts.

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Year Home & Garden Today's Teen $230,000 210,000 190,000 50,000 40,000 $720,000 $160,000 280,000 200,000 40,000 40,000 $720,000 Total