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i) Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $ 5.23 million per year. Your upfront setup costs to be ready to produce the part would be $ 8.19 million. Your discount rate for this contract is 7.8 %

a.What does the NPV rule say you should do? (two decimal)

b.If you take the contract, what will be the change in the value of your firm? (two decimal)

ii) One yearago, your company purchased a machine used in manufacturing for $120,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $140,000 today. It will be depreciated on astraight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin(revenues minus operating expenses other thandepreciation) of $40,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $25,000 per year. The current machine is being depreciated on astraight-line basis over a useful life of 11years, and has no salvagevalue, so depreciation expense for the current machine is $10,909 per year. The market value today of the current machine is $55,000. Yourcompany's tax rate is 42 %, and the opportunity cost of capital for this type of equipment is 11 %. Should your company replace itsyear-old machine? (round to nearest dollar)