Merrill Corp. has the following information available about a potential capital investment: Initial investment $ 1,200,000...

Merrill Corp. has the following information available about a potential capital investment:


Initial investment	$	1,200,000
Annual net income	$	120,000
Expected life		8	years
Salvage value	$	130,000
Merrill’s cost of capital		10	%

Assume straight line depreciation method is used.

Required:

1. Calculate the project’s net present value.

2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent.

3. Calculate the net present value using a 13 percent discount rate.

4. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 13 percent.

Solutions

Expert Solution

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ekkarill92 answered 1 year ago

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