Two mutually exclusive investment projects have the following forecasted cash flow:
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) Calculate internal rate of return for each project.
b) Calculate net present value for each project if firm has 10 percent cost of capital.
c) Which project must be adopted? Explain why?