How to calculate payback period?

project cash outflow is 200000.net cash inflow =   

year                          1             2                 3                  4             5

 net cash inflow   99500    110000     96000       96000    68000                                                                                                        

payback period = 1 yr + 100500\110000 =1.91 yrs

my question is how payback period is calculated 1 yr and why not 3 yr.

can anyone tell me how to use payback period approach in selecting a project.

Project A: intial investment-12000 economic life 8yrs estimated cash flows for each year-

2500 3500 4000 4000 3000 2000 1500 5000

Project B: intial investment-28000 and economic life 12yrs and estimated cash flows each year-

5000 6000 6000 8000 12000 13000 13000 13000 11000 8000 3000 500

which project should be taken up???????