Question
2A.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
2A.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 $4.98million per year. Your upfront setup costs to be ready to produce the part would be $7.94 million. Your discount rate for this contract is 8.4%.
a. What is the IRR?
b. The NPV is $4.80 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?
a. What is the IRR?
The IRR is %. (Round to two decimal places.)
2B.
You are considering making a movie. The movie is expected to cost$10.2million up front and take a year to produce. After that, it is expected to make $4.4 million in the year it is released and $1.8 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 10.1%?
What is the payback period of this investment?
The payback period is-----years. (Round to one decimal place.)
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