Determining the growing annuity


Southern California Publishing Company is trying to decide whether or not to revise its popular textbook, Financial Psychoanalysis Made Simple. It has estimated that the revision will cost $50,000. Cash flows from increased sales will be $12,000 the first year. These cash flows will increase by 15 percent per year. The book will go out of print five years from now. Assume that the initial cost is paid now and revenues are received at the end of each year. if the company requires an 11% return for such an investment, should it undertaker the revision.

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Finance Basics: Determining the growing annuity
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