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Capital Budgeting Social Circle Publications Inc. is considering two new magazine products. The estimated net cash...

Capital Budgeting

Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follow:

Year

Sound Cellar

Pro Gamer

1

65,000

70,000

2

60,000

55,000

3

25,000

35,000

4

25,000

30,000

5

45,000

30,000

Total

220,000

220,000

Each product requires an investment of $125,000. A rate of 10% has been selected for the net present value analysis.

  1. Calculate the payback period for the two products.
  2. Calculate the net present value for the two products.

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