The firm requires a minimum return of 20% on any capital expenditure. Details of the two proposals are summarized below:

Project A : Initial Capital cost $200,000. The net cash inflow in year 1 was $50,000 year 2 was $ 100,000 year 3 was $200,000, year 4 was $ 200,000 and year 5 was $100,000. Project B initial capital cost was $250,000. The net cash inflow in year 1 was $20,000 year 2 was $150,000 year 3 was $250,000 year 4 was $100,000 and year 5 was $150,000.

a) Calculate the payback period and the net present value for the two projects. The discount factor would be based on 20% discount rate.

b) Based on these measures only, which project would you recommend?