Yearly Cash Flows and Net Present Value

A company is evaluating two projects, Project A and Project B. The initial investments and yearly cash flows are as follows:

• Project A:
  • Initial investment: $20,000
  • Year 1: $7,000
  • Year 2: $8,000
  • Year 3: $9,000
  • Year 4: $10,000
• Project B:
  • Initial investment: $25,000
  • Year 1: $9,000
  • Year 2: $10,000
  • Year 3: $11,000
  • Year 4: $12,000

Requirements: (a) Calculate the NPV for each project using a discount rate of 10%. (b) Determine which project should be accepted if they are mutually exclusive. (c) If the projects are independent, should both be accepted? (d) Calculate the IRR for both projects.