5 6 7 8 Q1. Infotech Corp, has been offered a ten-year contract to supply in industrial customer. After careful study. the company has estimated the following data relating to the contract: Cost of equipment needed $425,000.00 9 Working capital needed $60,000.00 10 Annual cash receipts less cash operating costs $78,000.00 11 Salvage value of equipment at end of the contract $5,000.00 12 13 It is not expected that the contract would be extended beyond the initial contract period. 14 The company's discount rate is 11%. 15 16 Required: 17 18 a). Using the net present value (NPV) method, determine if the contract should be accepted. Round all 19 computations to the nearest dollar. Ignore income taxes. (8 marks) 20 21 Items Years Cash Inflow/Outflo Discount Factor Present Value 22 23 24 25 26 27 28 29 b) Based on NPV method, should the contract be accepted ? (1 mark) 30 SECTION 3 SECTION 5 FORMULA SHEET SECTION 4 SECTION 6 ORATION CLICK HERE TO SAVE YOUR WORK C86 Present Val 19 computations to the nearest dollar. Ignore income taxes. (8 marks) 20 21 Items Years Cash Inflow/Outflo Discount Factor 22 23 24 25 26 27 28 29 b) Based on NPV method, should the contract be accepted ? (1 mark) 30 31 c). Explain why you said yes or no in your answer in (b) above. (1 mark) 2 3 4