Hi, I need help with 1b part of this question. Particularly the present value of

Question

Hi, I need help with 1b part of this question. Particularly the present value of net cash flow.
So far I have:
present value of net cash flow
-sound cellular- :
year 1: 59091
year 2: 49587
year 3: 18783
year 4: 17075
year 5: 27941
-Amount to be invested????
Which is incorrect. Can anyone help me get the right answer?

PR 25-2B Cash payback period, net present value method, and analysis for a service company Social Circle Publications Inc. is considering two new magazine products. The estimated net cash flows from each product are as follows: OBJ. 2, 3 V1. b. Pro Gamer, 49,465 Sound Cellar Pro Gamer 70,000 55,000 35,000 30,000 30,000 $220,000 Year 65,000 60,000 25,000 25,000 45,000 $220,000 Total Each product requires an investment of $125,000. A rate of 10% has been selected for the net present value analysis. I. Compute the following for each product: a. Cash payback period. b. The net present valuc. Usce the present valuc of $1 table appcaring in this chapter (Exhibit 2). 2. Prepare a brie report advising managment on the relative merits of each of the two products

Explanation / Answer

Amount to be invested is given in the question i.e. $125,000

Cost of Capital = 10%

Year

PVF @10%

Sound Cellar Cash Inflow

Pro gamer Cash Inflow

PV of Cash inflows of Sound Cellar

PV of Cash inflows of Pro Gamer

1

0.909

65,000

70,000

59,085

63,630

2

0.826

60,000

55,000

49,560

45,430

3

0.751

25,000

35,000

18,775

26,285

4

0.683

25,000

30,000

17,075

20,490

5

0.621

45,000

30,000

27,945

18,630

Total

172,440

174,465

NPV = PV of cash inflows – Initial Cash outflow

Sound Cellar = $172,440 – 125,000

Sound Cellar NPV= $47,440

Pro Gamer = $174,465 – 125,000

Pro Gamer NPV = $49,465

Pro Gamer machine is good as NPV is higher in that case

Year

PVF @10%

Sound Cellar Cash Inflow

Pro gamer Cash Inflow

PV of Cash inflows of Sound Cellar

PV of Cash inflows of Pro Gamer

1

0.909

65,000

70,000

59,085

63,630

2

0.826

60,000

55,000

49,560

45,430

3

0.751

25,000

35,000

18,775

26,285

4

0.683

25,000

30,000

17,075

20,490

5

0.621

45,000

30,000

27,945

18,630

Total

172,440

174,465

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