Question: The ABC company is considering adding clothes to their gift shop. They estimate the cost of new inventory will be $9,000 and remodeling expenses will

The ABC company is considering adding clothes to their gift shop. They estimate the cost of new inventory will be $9,000 and remodeling expenses will be $1,000. Toy sales are expected to produce net cash inflows of $1,300, $4,900, $4,400, and $4,100 over the next four years, respectively. Should ABC add clothes as a product line? ABC assigns a 3-year payback period to this project? Why or why not?

Yes; The payback period is 3.09 years.

No; The payback period is 3.09 years.

Yes; The payback period is 3.94 years.

Yes; The payback period is 2.86 years.

No; The payback period is 2.86 years.

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