Reference no: EM132531756
Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $1,100,000. 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 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? Explain why one of the projects is a better choice than the other
CASH
INFLOW (CFt)
YEAR
PROJECT A
PROJECT B
1
200,000
350,000
2
250,000
300,000
3
300,000
250,000
4
350,000
200,000
5
400,000
400,000
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