Question: 2 mutually exclusive investment projects have the following forecasted cash flows:
|
YEAR
|
A
|
B
|
|
0
|
-20,000
|
-20,000
|
|
1
|
10,000
|
0
|
|
2
|
10,000
|
0
|
|
3
|
10,000
|
0
|
|
4
|
10,000
|
60,000
|
[A] Calculate the internal rate of return for each project.
[B] Calculate the net present value for each project if the firm has a 10 percent cost of capital. Which project should be adopted? Explain?