Jack is considering adding toys to his general store.He estimates that the cost of inventory will be $4,200.The remodeling and shelving costs are estimated at $1,500.Toy sales are expected to produce net cash inflows of $1,200,$1,500,$1,600,and $1,750 over the next four years,respectively.Should Jack add toys to his store if he assigns a three-year payback period to this project?
A)yes;because the payback period is 2.94 years.
B)yes;because the payback period is 2.02 years.
C)yes;because the payback period is 3.80 years.
D)no;because the payback period is 2.02 years.
E)no;because the payback period is 3.80 years.

Question

Jack is considering adding toys to his general store.He estimates that the cost of inventory will be $4,200.The remodeling and shelving costs are estimated at $1,500.Toy sales are expected to produce net cash inflows of $1,200,$1,500,$1,600,and $1,750 over the next four years,respectively.Should Jack add toys to his store if he assigns a three-year payback period to this project?
A)yes;because the payback period is 2.94 years. 
B)yes;because the payback period is 2.02 years. 
C)yes;because the payback period is 3.80 years. 
D)no;because the payback period is 2.02 years. 
E)no;because the payback period is 3.80 years.

Quizplus · Accepted Answer

Jack should reject the toy project because the payback period exceeds 3 years.

Jack Is Considering Adding Toys to His General Store