You are a project manager for the Swirling Seas Cruises food division. You’re considering two different projects regarding food services on the cruise lines. The initial cost of Project Fish’n for Chips will be $800,000, with expected cash inflows of $300,000 per quarter. Project Picnic’s payback period is six months. Which project should you recommend?

A.
ProjectFish’n for Chips, because the costs on Project Picnic are unknown.

B.
Project Picnic, because ProjectFish’n for Chips’ payback period is two months longer than Project Picnic’s.

C.
Project Picnic, because ProjectFish’n for Chips’ payback period is four months longer than Project Picnic’s.

D.
ProjectFish’n for Chips, because its payback period is two months shorter than Project Picnic’s.

Explanation:
The payback period for Project Fish’n for Chips is eight months. This project will receive $300,000 every three months, or $100,000 per month. The $800,000 will be paid back in eight months.