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As of December 31, 2021, your company, Timo Inc., is considering a five-year contract with a client to offer compensation consulting services on a

 

As of December 31, 2021, your company, Timo Inc., is considering a five-year contract with a client to offer compensation consulting services on a fee basis. You have a one-time cost of $260 thousand. Your expected free cash flow from this service over the term of the contract is expected to be: YEAR 2022 2023 2024 2025 2026 FREE CASH FLOW ($ thousands) $60 $82 $86 $107 $188 You would like to know what this contract is worth now as you consider using the same three staff for other projects or contracts. The discount rate commensurate with this contract is 10%. 1. What is the NPV? 2. What is the BCR? 3. Does the NPV and BCR support the investment? Why or why not?

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