RST Ltd. is analyzing two potential investments. The details are as follows:

• Investment A:
  • Initial Cost: $600,000
  • Expected Life: 4 years
  • Annual Net Cash Inflow: $160,000
• Investment B:
  • Initial Cost: $900,000
  • Expected Life: 5 years
  • Annual Net Cash Inflow: $220,000

Requirements:

1. Calculate the payback period for both investments.
2. Compute the NPV using a discount rate of 12%.
3. Compute the IRR for both investments.
4. Recommend which investment to undertake.