Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883



Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Cash payback period, net present value method, and analysis

McMoms Publications Inc. is considering two new magazine products. 11w estimated netcash flows from each product are as follows:

Each product requires an investment of $400.000. A rate of 10% has been selected forthe net present value analysis.


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.

To determine


Concept introduction:

Cash payback period:

The time taken for earning the amount of investment made through the net cash flows.

Net present value method:

It is a method of determining the present value of cash flows over the period by the multiplying the cash flows with the discounting factor of the required rate.

To compute:

The cash payback period for each product.


          M.P. Inc.

                           (Amount in $)

    Cash FlowCumulativeCash FlowCumulative
      1  220,000  220,000  188,000  188,000
      2  180,000  400,000  212,000  400,000

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