Personal Care Products Company is considering an investment in one of two new product lines. The investment required for either product line is $550,000. The net cash flows associated with each product are as follows:

a. Recommend a product offering to Personal Care Products Company, based on the cash payback period for each product line.
b. Why is one product line preferred over the other, even though they both have the same total net cash flows through eightperiods?

Transcribed Image Text:

Liquid Soap $150,000 140,000 130,000 130,000 100,000 90,000 70,000 70,000 $880,000 Cosmetics $110,000 110,000 110,000 110,000 110,000 110,000 110,000 110,000 $880,000 Year 1 2 4 5 6 8 Total