Computation of internal rate of return and NPV
Two mutually exclusive investment projects have the following forecasted cash flows:
Year 0: (A) $-20,000 (B) $-20,000
Year 1: (A) $10,000 (B) 0
Year 2: (A) $10,000 (B) 0
Year 3: (A) $10,000 (B) 0
Year 4: (A) $10,000 (B) $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? Why?