Which of the two products shold Lou's division pursue? Why? (PLEASE PROVIDE DETAILED REASON) Thanks.

Payback Period (Years) MIGHT BE WRONG PLEASE MAKE SURE.

Which of the two products shold Lou's division pursue? Why? (PLEASE PROVIDE DETAILED REASON) Thanks.

Payback Period (Years) MIGHT BE WRONG PLEASE MAKE SURE.

Payback Period: Sales revenues Variable expenses Fixed out-of-pocket operating costs Annual net cash inflows Product A Product B S 250,000 350,000 S (120,000) (170,000) S (70,000) $ (50,000) 60,000 S 130,000 Investment required Annual net cash inflow (above) Payback period (years) $ 170,000 380,000 $ 60,000 130,000 2.92 2.83 Net Present Value: Amount of Cash Flows Item Periods PV Product A Purchase of equipment Net annual cash inflows (above) Net Present Value: O (170,000) ($170,000) 5 60,000 $196,458 $26,458 Product B: Purchase of equipment Net annual cash inflows (above) Net Present Value: 0 (380,000) ($380,000) 5 130,000 $425,658 $45,658 Profitability Index Net Present Value Investment required Project Profitability Index roduct A Product B $45,658 $ 170,000 380,000 0.12 $26,458 0.16