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.

Body LotionLiquid Soap

Payback period for liquid soap	1 year2 years3 years4 years5 years6 years7 years8 years
Payback period for body lotion	1 year2 years3 years4 years5 years6 years7 years8 years

b. The project with the

greatestsmallest

net cash flows in the early years of the project life will be favored over the one with the

greatestsmallest

net cash flows in the initial years.