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26-6 Qash payback method Lily Products Company is considering an investment in one of two...

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26-6 Qash payback method 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: EX OBJ.2 Excel Liquid Soap $170,000 50,000 120,000 100,000 70,000 40,000 40,000 30,000 $720,000 Year Body Lotion 90,000 90,000 90,000 90,000 90,000 90,000 90,000 $720,000 Total a. Recommend a product offering to Lily Products Company, based on the cash payback period for each product line. b.Why is one product line preferred over the other even though they both have the same total net cash flows through eight periods? 14 a 15 16 17 18 19 20 nitial investment: Liquid Soap Body Lotion Net Cash Flow Cumulative Net Cash Flows Net Cash Flow Cumulative Net Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 23 24 25 26 27 28 29 The Liquid Soap product line achieves payback in The Body Lotion product line achieves payback in The 30 31 product line is recommended, based on its shorter cash payback period. 35 36 b. 37 [Key essay answer here] 38 39 40 41 Ex. 26-6

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