Two mutually exclusive projects (G and H) have the following expected cash flows:
|
Year
|
G
|
H
|
|
0
|
-$10,000
|
$-10,000
|
|
1
|
5,000
|
0
|
|
2
|
5,000
|
0
|
|
3
|
5,000
|
17,000
|
a. Calculate the internal rate of return for each project.
b. Calculate the net present value for each project, assuming the firm's weighted cost of capital is 12 percent.
c. Which project should be adopted? Why?