Question

0.72 points Merril Corp. has the following information avaiable about a potential capital investment 1,300,000 S 130,000 Intial investment Annual net incom Expected Ite Sarage valuce Mcmils cost of captal 8 yearm 140,000 10% Assume straight ine depreciation method is used. Required: he. u ure w ue of รเ Present w ue ct ropriate tactor s trom the tables provided. Do not round intermediate calculations. Round the tinal dala ,噚啡 E L Fuure wu Presen: V ue / nuty of 1 ] Use a :4ะเ % 4 PM -AIL t nr X answer to nearest whole dollar) S 167,103 2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent Greater than 10 Percent Less than 10 Percent 3. Calculato the net prosent valuo using a 13 percont discount rate Future Value of $1, Present Value of $1, Future Value Annuity of S1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations Round the tinal answer to nearest whole dollar:)

Answer 1

Answer :

Given data is :

Initial investment = $ 1,300,000

Annual net income = $ 130,000

Expected life = 8 years

Salvage value = $ 140,000

Cost of capital = 10%

1)Net present value :

Annual cash inflows
Particulars	Amount
Initial investment	$ 1,300,000
Less:Salvage value	$ 140,000
Amount remaining	= $ 1,300,000 - 140,000 = $ 1,160,000
Life	8 years
Annual depreciation	= $ 1,160,000 / 8 = $ 145,000
Annual net income	$ 130,000
Annual cash flows	= $ 145,000 + $ 130,000 = $ 275,000
Net present value @ 10 % for 8 years	5.3349
PV of inflows	= $ 275,000 * 5.3349 = $ 1,467,098
Pv of salvage	= $ 140,000 * 0.4665 = $ 65,310
Pv of inflows	= $ 1,467,098 + $ 65,310 = $ 1,532,408
Less:Initial value	$ 1,300,000
Net present value	= $ 1,532,408 - $ 1,300,000 = $ 232,408

Therefore:

Net present value = $ 232,408

Note : As per HomeworkLib rules we answered only 1 question if you want the answer for remaining question please upload it as another question.Thank you.