Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $60,000. 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?

Cash inflows (CF) Project A Project B Year 3 $10,000 20,000 30,000 40,000 20,000 $40,000 30,000 20,000 10,000 20,000