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

Initial investment	$	2,500,000
Annual net income	$	160,000
Expected life		8	years
Salvage value	$	170,000
Merrills cost of capital		7	%

Assume straight line depreciation method is used.

Required:
1.	Calculate the projects net present value. Assume straight line depreciation method is used. (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.)

2.

Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 7 percent.

	Less than 7 Percent
	Greater than 7 Percent

3.	Calculate the net present value using a 9 percent discount rate. Assume straight line depreciation method is used. (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.)

4.

Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 9 percent.

a.

b.

	More than 9 percent
	Less than 9 percent
c.	Equal to 9 percent