Calculating Net Present Value, Predicting Internal Rate of Return
Otis Company has the following information about a potential capital investment:
Initial investment | $400,000 |
Annual cash inflow | $ 70,000 |
Expected life | 10 years |
Cost of capital | 11% |
1.Calculate and evaluate the net present value of this project.
2.Without any calculations, explain whether the internal rate of return on this project is more or less than 11 percent.
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