#19: Why should managers use several techniques to rank capital projects? Which technique should be used as the primary evaluator and why?
#30: Bachâ€™s Clothing Store is considering a new product line: umbrellas and rain gear. The new product line would require an investment of $20,000 in equipment and fixtures and $40,000 in working capital. Store managers expect the following pattern of net cash inflows from the new product line over the life of the investment. Year Amount 1 $5,000 2 9,000 3 16,000 4 18,000 5 15,000 6 14,000 7 12,000 A: Compute the payback period for the proposed new product line. If Bachâ€™s requires a four-year pretax payback on its investments, should the company invest in the new product line? Explain B: Should Bachâ€™s use any other capital project evaluation methods before making an investment decision? Explain