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    Chapter 16

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    Semh Zavala
    The document analyzes the cash flows and profitability of publishing a new book title over multiple years. It provides sales projections, costs including marketing, royalties paid to the author, and net cash flows each year. The summary calculates discounted payback periods and internal rates of return to evaluate the investment and determine if it provides an acceptable return.

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    Chapter 16

    Uploaded by

    Semh Zavala
    32 views25 pages
    The document analyzes the cash flows and profitability of publishing a new book title over multiple years. It provides sales projections, costs including marketing, royalties paid to the author, and net cash flows each year. The summary calculates discounted payback periods and internal rates of return to evaluate the investment and determine if it provides an acceptable return.

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    The document analyzes the cash flows and profitability of publishing a new book title over multiple years. It provides sales projections, costs including marketing, royalties paid to the author, and net cash flows each year. The summary calculates discounted payback periods and internal rates of return to evaluate the investment and determine if it provides an acceptable return.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    32 views25 pages

    Chapter 16

    Uploaded by

    Semh Zavala
    The document analyzes the cash flows and profitability of publishing a new book title over multiple years. It provides sales projections, costs including marketing, royalties paid to the author, and net cash flows each year. The summary calculates discounted payback periods and internal rates of return to evaluate the investment and determine if it provides an acceptable return.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    Taking Inflation Into Account

    Interest Rate (Annual) 5.0% Year


    Term (Years) 10 0
    Deposit Per Month ($100) 1
    Initial Deposit ($10,000) 2
    Deposit Type 0 3
    Future Value $31,998.32 4
    5
    Inflation Rate 2% 6
    Present Value (Discount Factor) $26,249.77 7
    Present Value (PV() Function) $26,249.77 8
    9
    10
    Discount Factor
    1.00
    0.98
    0.96
    0.94
    0.92
    0.91
    0.89
    0.87
    0.85
    0.84
    0.82
    Income Investing Versus Purchasing a Rental Property
    Fixed-Income Yield (Annual) 5.0%
    Term (Years) 10
    Rental Income (Annual) $24,000
    Future Value of Rental Property $1,000,000

    Maximum Amount to Pay for Rental Property ($799,235)


    Buying Versus Leasing
    Discount Rate 6.0%
    Term (Years) 2
    Lease Payment (Monthly) ($240)
    Future Value of Equipment $0
    Purchase Price $5,000
    Present Value of Leasing Option $5,415.09
    Present Value of Buying Option $5,000.00
    Year 0 1 2
    CASH FLOW Purchase
    Net Cash Flow ($799,235) $24,000 $24,000
    Cumulative Net Cash Flow ($799,235) ($775,235) ($751,235)

    DISCOUNTING
    Discount Rate 5%
    Discount Factor 1 0.95 0.91
    Discounted Cash Flow ($799,235) $22,857 $21,769
    Discounted Cumulative Cash Flow ($799,235) ($776,378) ($754,609)
    3 8 9 10
    Sale
    $24,000 $24,000 $24,000 $1,024,000
    ($727,235) ($607,235) ($583,235) $440,765

    0.86 0.68 0.64 0.61


    $20,732 $16,244 $15,471 $628,647
    ($733,877) ($644,118) ($628,647) $0
    Year 0 1 2 3 4 5
    CASH FLOW Purchase
    Net Cash Flow ($799,235) $24,000 $24,000 $24,000 $24,000 $24,000
    DISCOUNTING
    Discount Rate 5%
    Net Present Value $0.00
    6 7 8 9 10
    Sale
    $24,000 $24,000 $24,000 $24,000 $1,024,000
    Year 0 1 2 3 4
    CASH FLOW
    Net Cash Flow ($50,000) ($5,000) $15,000 $20,000 $21,000
    DISCOUNTING
    Discount Rate 10%
    Net Present Value $881
    5

    $22,000
    Period 0 1 2 3 4
    CASH FLOW
    Net Cash Flow ($10,000) $2,000 $2,500 $3,000 $2,500
    Cash Flow Date 1/1/2018 3/15/2018 8/15/2018 2/15/2022 6/15/2022
    DISCOUNTING
    Discount Rate 10%
    Net Present Value ($780)
    5

    $2,000
    12/31/2022
    Year 0 1 2
    CASH FLOW Purchase
    Net Cash Flow ($500,000) $55,000 $75,000
    Cumulative Net Cash Flow ($500,000) ($445,000) ($370,000)
    Payback Period 6
    Exact Payback Period 5.75

    DISCOUNTING
    Discount Rate 10%
    Discount Factor 1 0.91 0.83
    Discounted Cash Flow ($500,000) $50,000 $61,983
    Discounted Cumulative Cash Flow ($500,000) ($450,000) ($388,017)
    Payback Period 9
    Exact Payback Period 8.25
    3 4 5 6 7 8

    $80,000 $95,000 $105,000 $120,000 $120,000 $120,000


    ($290,000) ($195,000) ($90,000) $30,000 $150,000 $270,000

    0.75 0.68 0.62 0.56 0.51 0.47


    $60,105 $64,886 $65,197 $67,737 $61,579 $55,981
    ($327,911) ($263,025) ($197,828) ($130,091) ($68,512) ($12,532)
    9

    $120,000
    $390,000

    0.42
    $50,892
    $38,360
    Year 0 1 2 3 4
    CASH FLOW
    Net Cash Flow ($50,000) ($5,000) $15,000 $20,000 $21,000
    DISCOUNTING
    Discount Rate 10%
    Net Present Value $881
    Internal Rate of Return 10.51%
    5

    $22,000
    Period 0 1 2 3
    CASH FLOW
    Net Cash Flow ($10,000) $2,000 $2,500 $3,000
    Cash Flow Date 1/1/2022 3/15/2022 8/15/2022 2/15/2023
    DISCOUNTING
    Discount Rate 10%
    Net Present Value $845
    Internal Rate of Return 18.99%
    4 5

    $2,500 $2,000
    6/15/2023 12/31/2023
    Year 0 1 2 3 4
    CASH FLOW
    Net Cash Flow ($50,000) ($5,000) $15,000 $20,000 $21,000
    DISCOUNTING
    Finance Rate 8%
    Reinvestment Rate 6%
    Internal Rate of Return 9.14%
    5

    $22,000
    PER-UNIT CONSTANTS
    List Price $24.95
    Average Customer Discount 45%
    PP&B $5.00
    Cost of Sales $3.75
    Author Royalty 7.5%
    Margin 12.4%

    Year 0 1 2 3
    Units Printed 0 50,000 0 0
    Units Sold 0 17,000 10,500 4,000

    OPERATING COSTS
    New Title Costs $0 $2,500 $0 $0
    Total PP&B 0 $250,000 $0 $0
    Marketing 0 $15,000 $5,000 $2,000
    Total Cost of Sales $0 $63,750 $39,375 $15,000
    Author Advance $25,000 $0 $0 $0
    Author Royalties $0 $6,811 $19,648 $7,485

    SALES
    $ Sales $0 $233,283 $144,086 $54,890
    Translation Rights $0 $5,000 $0 $0
    Book Club Rights $0 $0 $1,000 $0

    CASH FLOW
    Net ($25,000) ($99,779) $81,063 $30,405
    Cumulative ($25,000) ($124,779) ($43,716) ($13,311)
    Discount Rate 12.4%
    Discount Factor 1.00 0.89 0.79 0.70
    Discounted Net ($25,000) ($88,748) $64,130 $21,394
    Discounted Cumulative ($25,000) ($113,748) ($49,618) ($28,223)

    CASH FLOW ANALYSIS


    Undiscounted Payback Period 4
    Undiscounted Payback Point 3.5
    Discounted Payback Period 5
    Discounted Payback Point 4.8
    Net Present Value ($113,748) ($49,618) ($28,223)
    Internal Rate of Return -30.77% -7.36%
    4 5 6 7 8 9 10
    0 0 0 0 0 0 0
    3,500 3,000 2,500 2,000 1,500 1,500 1,000

    $0 $0 $0 $0 $0 $0 $0
    $0 $0 $0 $0 $0 $0 $0
    $2,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
    $13,125 $11,250 $9,375 $7,500 $5,625 $5,625 $3,750
    $0 $0 $0 $0 $0 $0 $0
    $6,549 $5,614 $4,678 $3,743 $2,807 $2,807 $1,871

    $48,029 $41,168 $34,306 $27,445 $20,584 $20,584 $13,723


    $2,500 $0 $0 $0 $0 $0 $0
    $0 $0 $1,000 $0 $0 $0 $0

    $28,854 $23,304 $20,253 $15,203 $11,152 $11,152 $7,101


    $15,544 $38,848 $59,101 $74,303 $85,455 $96,607 $103,708

    0.63 0.56 0.50 0.44 0.39 0.35 0.31


    $18,059 $12,972 $10,028 $6,695 $4,368 $3,885 $2,200
    ($10,165) $2,808 $12,835 $19,530 $23,898 $27,784 $29,984
    ($10,165) $2,808 $12,835 $19,530 $23,898 $27,784 $29,984
    6.69% 13.78% 17.87% 20.02% 21.18% 22.06% 22.48%

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