After-tax cash flows for two mutually exclusive projects (with economic lives each) are:
|
Year
|
Project X
|
Project Y
|
|
0
|
$(12,000)
|
$(12,000)
|
|
1
|
5,000
|
0
|
|
2
|
5,000
|
0
|
|
3
|
5,000
|
0
|
|
4
|
5,000
|
25,000
|
The company's cost of capital is 10 percent. Compute the following:
1. The internal rate of return for each project.
2. The net present value for each project.
3. Which project should be selected? Why?