iPad? 11:25 PM 39% Question 2 (of 2) ?? : Save & Exit | Submit 9.00 points Merri
ID: 2559300 • Letter: I
Question
iPad? 11:25 PM 39% Question 2 (of 2) ?? : Save & Exit | Submit 9.00 points Merrill Corp, has the following information available about a potential capital investment 1,800,000 $ 200,000 Expected ife Salvage value Mernits cost of capital 8 years s 240,000 10% Assume straight line depreciation method is used Required: 1. Calculate the projects net present value (Euturnautof$1. Prosentyak 0.0 1. EutureVilutAmutsS1 S1.) (Use appropriate factors) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dollar.) 2. Without making any caloulations, determine whether the internal rate of returm (RR) is more or less than 10 percent Less than 10 Percent Greater than 10 Percent 3. Calculate the net present value using a 15 percent discount rate Euture Value of $1. Present Value of $1.Eture Value Anouity of S1 Present Value Annuity of S1) (Use appropriate factoris) from the tables provided. Do not round intermediate calculations. Round the final answer to nearest whole dellar.) 4. Without making any calculations, determine whether the internal rate of return IRR) is more or less than 15 percent More than 15 percent O Less than 15 percent Equal to 15 percent Hints References eBook & Resources Hint 1Explanation / Answer
1a). Cash Inflow
Annual income- 200000
Annuity factor for 8 yrs @10%-5.33
Discounted annual cash inflow - 10,66,000
Discounted Salvage value =0.467*240000
=112080
Total inflow = 1066000+112080 = 1178080
Cash outflow = 1800000
Net present value = discounted cash inflow-discounted cash outflow
=1178080-1800000
= -621920
2 a) less than 10% while we discount the cash inflow with 10%we got. Negative cash inflow
3a) annuity factor @15% is 4.487
Annual Cash flow =200000
Discounted cash flow = 200000*4.487
= 897400
Salvage value = 240000* 0.327
=78456
Total discounted cash flow = 897400+78456
= 975856
Net present value = 975856-1800000
= -824144
4a) Less than 15% as explained above
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.