Cash Payback Method
Lily Products Company is considering an investment in one of two new product lines. The investment required for either product line is $540,000. The net cash flows associated with each product are as follows:
|Year||Liquid Soap||Body Lotion|
Recommend a product offering to Lily Products Company, based on the
cash payback period for each product line.
|Payback period for liquid soap|
|Payback period for body lotion|
b. The project with the net cash flows in the early years of the project life will be favored over the one with the net cash flows in the initial years.
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