Clare Company is considering the purchase of some labor saving equipment for its packaging department. The equipment is expected to result in labor cost savings of $50,000 per year for the expected five-year life of the equipment. The cost of the equipment is $120,000 and the desired rate of return is 6%.

1. The NPV of the investment for Clare Company is ___________.

Is the IRR greater than, equal to or less than the desired rate of return?

2. What will the NPV be if the desired rate of return is 4%?

Is the IRR greater than, equal to or less than the desired rate of return?

3. What will the NPV be if the desired rate of return is 8%?

Is the IRR greater than, equal to or less than the desired rate of return?