Question: Two mutually exclusive investment projects have the following estimated 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% cost of capital.
[C] Determine and explain which project should be adopted?