Comparison of projects with unequal lives. Melanie Leblanc, the general manager of Worldwide Foods Inc., has asked Frank Devine, the management accountant, to prepare an analysis for two mutually exclusive capital projects. The after-tax required rate of return of this company is 10%. The anticipated cash flows are as follows:

REQUIRED ‘
1. Compute the internal rate of return of both projects. Which project is preferable?
2. Compute the net present value of both projects. Which project is preferable?
3. Comment briefly on the results in requirements 1 and 2. Be specific in your comparisons.LO1

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Cash Inflows Investment Project No. Required Now Year 1 Year 2 Year 3 Year 4 12 $12,000 $14,400 $0 $0 $ 0 12,000 0 0 0 21,000