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clusive investment projects have the following forecasted cash flows: Year A B $-20,000 $-20,000 1 +10,000 2 +10,000 3 +10,000 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.

clusive investment projects have the following forecasted cash flows: Year A B $-20,000 $-20,000 1 +10,000 2 +10,000 3 +10,000 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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 7P
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7. Two mutually exclusive investment projects have the following forecasted cash flows: INTERMEDIATE Year A $–20,000 $–20,000 1 +10,000 +10,000 3 +10,000 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?
Transcribed Image Text:7. Two mutually exclusive investment projects have the following forecasted cash flows: INTERMEDIATE Year A $–20,000 $–20,000 1 +10,000 +10,000 3 +10,000 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?
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