Merrill Corporation has the following information available about a potential capital investment: Initial investment $ 1,000,000 Annual net income $ 100,000 Expected life 8 years Salvage value $ 110,000 Merrills cost of capital 7 Assume straight line depreciation method is used.

Calculate the projects net present value. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided.

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

Calculate the net present value using a 14 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided.

Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 14 percent.

TABLE 11.3A Future Value of an Annuity of $1 TABLE 11.2A Present Value of $1