Computation of IRR and NPV of the project and decision making
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 percent cost of capital.
c. Which project should be adopted? Why?