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    Dereck, Inc. - net present value and internal rate of return

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    Dereck, Inc. is considering the investment of $86,000 in a new product. The product will generate cash flow of $18,500 per year for each year of its 6-year life and will have a salvage value of $5,000 at the end of its life. Dereck's cost of capital is 10%.

    1) Calculate the net present value of the proposed investment. Ignore income taxes and round answers to the nearest $1

    2) What will the internal rate of return on this investment be relative to the cost of capital? Why?

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    Solution Preview

    Dereck, Inc. is considering the investment of $86,000 in a new product. The product will generate cash flow of $18,500 per year for each year of its 6-year life and will have a salvage value of ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate the net present value of the proposed investment. Ignore income taxes and round answers to the nearest $1.

    $2.19

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