Two mutually exclusive investment projects have the following forecasted cash flows:

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. 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?