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An investor is considering investing in a capital project. The project requires an outlay of 500,000 at outset and further payments at the end of each of the first 5 years, the first payment being 100,000 and each successive payment increasing by 10,000. The project is expected to provide a continuous income at a rate of 80,000 in the first year, 83,200 in the second year and so on, with income increasing each year by 4% per annum compound. The income is received for 25 years. It is assumed that, at the end of 15 years, a further investment of 300,000 will be required and that the project can be sold to another investor for 700,000 at the end of 25 years. (a) Calculate the net present value (NPV) of the project at a rate of interest of 11% per annum effective. (b) Without doing any further calculations, explain how the net present value would alter if the interest rate had been greater than 11% per annum effective. Answer: NPV would go down