Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $100,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table:

a. Determine the payback period of each project.
b. Because they are mutually exclusive, Shell must choose one. Which should the company invest in?
c. Explain why one of the projects is a better choice than theother.

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Cash inflows (CF) Project A $10,000 20,000 540,000 30,000 40,000 20,000 Year Project B 30,000 20,000 10,000 20,000 4 5