Answer to Question #310658 in Management for Aaa

Question

Pearson International Publishing Company is trying to decide whether to

revise its popular textbook, Fundamental of Corporate Finance. The company

has estimated that the revision will cost RM65,000. Cash flows for the first

year is RM18,000 and it will increase by 4 percent per year. The book will be

revised back after five years. The initial costs are paid now, and revenues are

received at the end of each year. If the company requires a 10 percent return

for the investment, should it undertake the revision.

Answer 1

4%+10% = 14%

(14/100)*(65000+18000)

0.14*83000 = RM11620