Shell Camping Gear, Inc. is considering two mutually excludive projects. Each requires an initial investment of $150,000. 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 as follows:

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 the other.

Year		Project A			Project B
1		$50,000			$55,000
2		$30,000			$45,000
3		$15,000			$35,000
4		$45,000			$15,000
5		$10,000			$25,000