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 1 170,000 90,000 2 150,000 90,000 3 120,000 90,000 4 100,000 90,000 5 70,000 90,000 6 40,000 90,000 7 40,000 90,000 8 30,000 90,000 Total $720,000 $720,000 a. 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.
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 1 170,000 90,000 2 150,000 90,000 3 120,000 90,000 4 100,000 90,000 5 70,000 90,000 6 40,000 90,000 7 40,000 90,000 8 30,000 90,000 Total $720,000 $720,000 a. 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.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter12: Capital Investment Decisions
Section: Chapter Questions
Problem 21BEA
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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
Year | Liquid Soap | Body Lotion | ||
1 | 170,000 | 90,000 | ||
2 | 150,000 | 90,000 | ||
3 | 120,000 | 90,000 | ||
4 | 100,000 | 90,000 | ||
5 | 70,000 | 90,000 | ||
6 | 40,000 | 90,000 | ||
7 | 40,000 | 90,000 | ||
8 | 30,000 | 90,000 | ||
Total | $720,000 | $720,000 |
a. 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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