The Oceania Company owns 25 hectares of property. It is considering several different development independent options. One option is a hotel (option A). Also under consideration is a more expensive amusement development (option B). The cash flows (in thousands of dollars) for the two options are projected to be:

YEAR	OPTION A $	OPTION B $
0	7 200	9 000
1	300	1 500
2	2 700	3 000
3	4 300	3 500
4	5 000	10 000

Required:

1. What is the payback of option A? Option B? Show the required calculations.(5 Marks)
2. Assuming a required return of 20 per cent, what are the Net Present Value for these 2 options? How do you interpret these? (5 Marks)
3. Discuss which of these two projects is preferable, by assuming a 20 per cent discount rate?