Keone Products Company is considering an investment in one of two new product lines. The investment required for either product line is $750,000. The net cash flows associated with each product are as follows: Year Liquid Soap Body Lotion 1 $140,000 $ 125,000 2 150,000 125,000 3 160,000 125,000 4 150,000 125,000 5 150,000 125,000 6 100,000 125,000 7 80,000 125,000 8 70,000 125,000 Total $1,000,000 $1,000,000 a. Recommend a product offering to Keone Products Company, based on the cash payback period for each product line. Line Item Description Year Payback period for liquid soap Payback period for body lotion b. The project with the net cash flows in the early years of the project life will be favored over the one with the net cash flows in the initial years..
Keone Products Company is considering an investment in one of two new product lines. The investment required for either product line is $750,000. The net cash flows associated with each product are as follows: Year Liquid Soap Body Lotion 1 $140,000 $ 125,000 2 150,000 125,000 3 160,000 125,000 4 150,000 125,000 5 150,000 125,000 6 100,000 125,000 7 80,000 125,000 8 70,000 125,000 Total $1,000,000 $1,000,000 a. Recommend a product offering to Keone Products Company, based on the cash payback period for each product line. Line Item Description Year Payback period for liquid soap Payback period for body lotion b. The project with the net cash flows in the early years of the project life will be favored over the one with the net cash flows in the initial years..
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Keone Products Company is considering an investment in one of two new product lines. The investment required for either product line is $750,000. The net cash flows associated with each product are as follows:
| Year | Liquid Soap | Body Lotion |
|---|---|---|
| 1 | $140,000 | $ 125,000 |
| 2 | 150,000 | 125,000 |
| 3 | 160,000 | 125,000 |
| 4 | 150,000 | 125,000 |
| 5 | 150,000 | 125,000 |
| 6 | 100,000 | 125,000 |
| 7 | 80,000 | 125,000 |
| 8 | 70,000 | 125,000 |
| Total | $1,000,000 | $1,000,000 |
a. Recommend a product offering to Keone Products Company, based on the cash payback period for each product line.
| Line Item Description | Year |
|---|---|
| Payback period for liquid soap |
|
| Payback period for body lotion |
|
b. The project with the
net cash flows in the early years of the project life will be favored over the one with the
net cash flows in the initial years..
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