Two mutually exclusive investment projects have the following forecasted cash flows

| March 29, 2017

Question
Two 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. Compute the internal rate of return for each project,

b. Compute the net present value for each project if the firm has a 10% cost of capital

c. Which project should be adopted and why?

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