A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses the straight-line depreciation method with a zero salvage value and has a (marginal) income tax rate of 40 percent.The firm%u2019s cost of capital is 12 percent.

a. Compute the internal rate of return and the net present value.

b. Should the firm accept or reject the project?