lithium, inc. is considering two mutually exclusive projects, a and b. project a costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. project b costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. lithium, inc.'s required rate of return for these projects is 10%. the internal rate of return for project a is:

The internal rate of return for project A is $26,074.38

Explanation:

Using the formula

R1/(1+K)^1 R2/(1+K)^2+ - - - Rn/(1+K)^n -

C =0

Where C = capital outlay, K=Rate of interest, R=Net cash flow

Given that K=10%, (10/100)=0.1 R1=$65,000, R2=$75,000 C =$95,000

Project A

65,000/(1+0.1)^1 + 75,000/(1+0.1)^2 - 95,000

65,000/(1.1)^1 +75,000/(1.1)^2 - 95,000

59090.91 + 61983.47 - 95,000

121074.38 - 95000

= $26,074.38

Project B

R1=$64,000, R2=$67,000,R3=$56,000, R4=$45,000 C =$120,000

64,000/(1+0.1)^1+ 67,000/(1+0.1)^2+ 56,000/(1+0.1)^3 + 45,000/(1+0.1)^4 - 120,000

64,000/(1.1)^1 + 67,000/(1.1)^2 + 56,000/(1.1)^3 + 45,000/(1.1)^4 - 120,000

58181.82 + 55371.90 + 42073.63 + 30735.61 - 120,000

= 186362.96 - 120,000

= $66,362.96

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