The following information relates to two possible projects, Baba and J. Chan. Both projects have an initial cash outlay of RM 200,000 and only one can be undertaken.

	Baba	J. Chan
year 0	(200,000)	(200,000)
year 1	120,000	70,000
year 2	120,000	90,000
year 3	80,000	130,000
year 4	60,000	160,000
Estimated resale value
At the end of Year 4	40,000	40,000

The cost of capital is 16% per annum.

The relevant discount factors for 16% are as follows:

Year

1 0.862

2 0.743

3 0.641

4 0.552

Required:

(a) For both projects calculate the following:

(i) The payback period

(ii) The net present value

(b) Which project should be accepted and why?