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Houston Fashions is considering a new product line that would require an investment of $140,000 in fixtures and displays and $180,000 in working capital. Store
Houston Fashions is considering a new product line that would require an investment of $140,000 in fixtures and displays and $180,000 in working capital. Store managers expect the following pattern of net cash inflows from the new product line over the life of the investment. Year 1 2 3 Amount $ 70,000 $ 78,000 $ 72,000 $ 56,000 $ 50,000 $ 48,000 $ 44,000 4 5 6 7 Required: a) Compute the payback period for the proposed new product line. Houston Fashions requires a four-year pre-tax payback period on its investments (Round to one decimal point.) should the company consider this investment? Explain. b) Should Houston Fashions use any other capital project evaluation method(s) before making an investment decision? Explain
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