Jack is considering adding toys to his general store. He estimates the cost of toy inventory will be $4,200. The remodeling and shelving costs are estimated at $1,500. Toy sales are expected to produce net annual cash inflows of $1,200, $1,500, $1,600, and $1,750 over the next four years, respectively. Should Jack add toys to his merchandise if he requires a three-year payback period? Why or why not?

Multiple Choice

Yes; because the payback period is 2.02 years

No; because the payback period is 2.02 years

Yes; because the payback period is 2.94 years

No; because the payback period is 3.80 years

Yes; because the payback period is 3.80 years