Choosing between two projects with acceptable payback periodsShell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $180,000. 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:

		Cash inflows (CFt)
Year		Project A		Project B
1		$30,000		$60,000
2		$40,000		$50,000
3		$50,000		$40,000
4		$60,000		$30,000
5		$40,000		$40,000

a.Determine the payback period of each project.

b.Because they are mutually exclusive, Shell must choose one. Which should the company invest in?

a.The payback period of project A is _____years.(Round to two decimal places.)

The payback period of project B is _____years.(Round to two decimal places.)

b.Because they are mutually exclusive, Shell must choose one. Using the payback period, which project should the company invest in?(Select the best answer below.)

Project A would be preferred over project B because the larger cash flows are in the later years of the project.

Project B would be preferred over project A because the larger cash flows are in the early years of the project