Comparison of projects with unequal lives. The manager of the Robin Hood Company is considering two investment projects that are mutually exclusive. The after¬

tax required rate of return of this company is 10%, and the anticipated cash flows are as follows:

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

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