Merrill Corp. has the following information available about a potential capital investment:

Initial investment ..........$1,600,000

Annual net income .......... $ 250,000

Expected life ............ 8 years

Salvage value ............ $ 350,000

Merrill’s cost of capital ........ 10%

Required:

1. Calculate the project’s net present value.

2. Without making any calculations, determine whether the internal rate of return (IRR) is more or less than 10 percent.

3. Calculate the net present value using a 20 percent discount rate.

4. Estimate the project’s IRR.