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1
    a)
    Particulars    Product (A)    Product (B)
    Sales Revenues    $250,000    $350,000
    Variable Cost    ($120,000)    ($170,000)
    Fixed, out of pocket, and operating cost    ($70,000)    ($50,000)
    Annual Net Cash Inflows    $60,000    $130,000
    b)
    Calculation of payback period
    Particulars    Product (A)    Product (B)
    Sales Revenues    $170,000    $380,000
    Variable Cost    $60,000    $130,000
    Payback Period (Years)    2.83    2.92
    c)
    Hence, the calculated annual net cash inflow of product A is $60,000 and product B is $130,000
2
    a)
    Product A
    Particulars    Year 1    Year 2    Year 3    Year 4    Year 5
    Sales    $250,000    $250,000    $250,000    $250,000    $250,000
    Less: Variable Expenses    ($120,000)    ($120,000)    ($120,000)    ($120,000)    ($120,000)
    Fixed out of pocket    ($70,000)    ($70,000)    ($70,000)    ($70,000)    ($70,000)
    Total cash flows    $60,000    $60,000    $60,000    $60,000    $60,000
    PVF @ 18%    0.862    0.743    0.641    0.552    0.476
    Present value    $51,724.14    $44,589.77    $38,439.46    $33,137.47    $28,566.78
    Present value of net cash inflows    $196,457.62
    Less: Investment    ($170,000)
    NPV    $26,458
    b)
    Product B
    Particulars    Year 1    Year 2    Year 3    Year 4    Year 5
    Sales    $350,000    $350,000    $350,000    $350,000    $350,000
    Less: Variable Expenses    ($170,000)    ($170,000)    ($170,000)    ($170,000)    ($170,000)
    Fixed out of pocket    ($50,000)    ($50,000)    ($50,000)    ($50,000)    ($50,000)
    Total...