Merrill Corp. has the following information available about a potential capital investment: Initial investment $ 2,400,000 Annual net income $ 170,000 Expected life 8 years Salvage value $ 180,000 Merrill’s cost of capital 8 % Assume straight line depreciation method is used. Required: 1. Calculate the project’s net present value. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.) 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 8 percent. multiple choice 1 Greater than 8 Percent Less than 8 Percent 3. Calculate the net present value using a 10 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.)
Merrill Corp. has the following information available about a potential capital investment:
Initial investment | $ | 2,400,000 | |
Annual net income | $ | 170,000 | |
Expected life | 8 | years | |
Salvage value | $ | 180,000 | |
Merrill’s cost of capital | 8 | % | |
Assume
Required:
1. Calculate the project’s
2. Without making any calculations, determine whether the
multiple choice 1
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Greater than 8 Percent
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Less than 8 Percent
3. Calculate the net present value using a 10 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.)
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