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In: Finance

Jack is considering adding work jeans and T-shirts to the items he stocks in his general...

Jack is considering adding work jeans and T-shirts to the items he stocks in his general store provided that his payback period is less than 2.5 years. He estimates that the initial cost of inventory will be $6,750. The remodeling expenses required for this addition are $18,200. Jean and T-shirt sales are expected to produce net cash inflows of $10,200, $14,500, and $16,600 over the next three years, respectively. Jack _____ add the jeans and T-shirts to his offerings as the payback period is _____ years.

Multiple Choice

  • should; 1.67

  • should; 3.67

  • should; 2.02

  • should not; 3.67

  • should not; 2.02

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