1. Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $5.06 million per year. Your upfront setup costs to be ready to produce the part would be $8.03 million. Your discount rate for this contract is 8.3%. a. What is the IRR? b. The NPV is $4.94 million, which is positive, so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?

2. You are considering making a movie. The movie is expected to cost $10.6 million up front and take a year to produce. After that, it is expected to make $4.9 million in the year it is released and $1.7 million for the following four years. What is the payback period of this investment? If you require a payback period of two years, will you make the movie? Does the movie have positive NPV if the cost of capital is 10.5%?