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1 SECTION 6 - TWO (2) Problem questions - Total 25 marks Question 1 - 10 marks Q1. Infotech Corp. has been offered a ten-year
1 SECTION 6 - TWO (2) Problem questions - Total 25 marks Question 1 - 10 marks Q1. Infotech Corp. has been offered a ten-year contract to supply an industrial customer. After careful study the company has estimated the following data relating to the contract Cost of equipment needed Working capital needed Annual cash receipts less cash operating costs Salvage value of equipment at end of the contract $125,000.00 $60,000.00 $78,000.00 $5,000.00 It is not expected that the contract would be extended beyond the initial contract period The company's discount rate is 11% Required a). Using the net present value (NPV) method, determine if the contract should be accepted. Round all computations to the nearest dollar. Ignore income taxes (8 marks) Present Value Years fash Inflow. Outflo Discount Facto Items New SECTION 6 FORMULA SHEET SECTION 5 SECTION 2 SECTION 4 SECTION 3
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