Question

1. Two mutually exclusive 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

1. Compute the internal rate of return for each project.

2. Compute the NPV for each project if the required rate is 10%.

3. Which project should be accepted, and why?

Answer 1