Herman is evaluating two capital projects and must pick one due to money constraints. Cash flows from the two projects are summarized below. Herman's required rate of return on projects is 12.5%.

Project A			Project B
Year	Amount		Year	Amount
0	-50,000		0	-30,000
1	30,000		1	27,500
2	30,000		2	27,500
3	30,000		3	27,500
4	30,000
5	30,000

• a) Calculate the NPV for each project. Using NPV only, which project should Herman select?
• b) You are Herman's advisor and you understand that only using NPV might lead to the incorrect investment decision in this case. Use the EAA method to advise which project Herman should select.