Jack Is Considering Adding Work Jeans and T-Shirts to the Items

Multiple Choice

Jack is considering adding work jeans and T-shirts to the items he stocks in his general store provided that his payback period is less than 2.5 years. He estimates that the initial cost of inventory will be $6,750. The remodeling expenses required for this addition are $18,200. Jean and T-shirt sales are expected to produce net cash inflows of $10,200, $14,500, and $16,600 over the next three years, respectively. Jack _____ add the jeans and T-shirts to his offerings as the payback period is _____ years.

A) should; 1.67
B) should; 2.02
C) should; 3.67
D) should not; 2.02
E) should not; 3.67