Reeds Flower Shop is seeking to purchase new refrigeration equipment.

a) Calculate each of the payback periods for the following,

b) Suggest and explain the best option;

Investment Option A:

$3800 dollar investment

Annual cash flows due to increased inventory $1100

Investment Option B:

$4900 dollar investment

Annual cash flows due to increase inventory

Year 1; $1250

Year 2: $1400

Year 3: $1850

Year 4: $1100