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Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $140,000. John Shell, president of the company, has set
Shell Camping Gear, Inc., is considering two mutually exclusive projects. Each requires an initial investment of $140,000. 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: 1 20,000 50,000 2 30,000 40,000 3 40,000 30,000 4 50,000 20,000 5 30,000 30,000
a.Determine the payback period of each project.
b.Because they are mutually exclusive, Shell must choose one. Which should the company invest in?
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