Problem: 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?