McMorris 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 $400,000. A rate of 10% has been selected for the net present value analysis.

Instruction
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.
2. Prepare a brief report advising management on the relative merits of each of the two products.

Transcribed Image Text:

Canadian Cycling $220,000 180,000 158,000 131,000 61,000 $750,000 Year European Hiking $188,000 212,000 150,000 110,000 90,000 $750,000 4 Total