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Disco Corporation has been offered a 6-year contract to supply computing services for a bank. Disco has developed the following estimated data for the contract:

Disco Corporation has been offered a 6-year contract to supply computing services for a bank. Disco has developed the following estimated data for the contract:

Cost of special computer needed $200,000

Working capital needed 10,000 Annual cash inflows (revenues) for 6 years 300,000

Annual cash outflows (expenses) for 6 years 265,000

Servicing of computer at the end of year 4 30,000

Salvage value of the computer at the end of 6 years 15,000

The companys required rate of return is 8%. The working capital will be released at the end of the 6-year contract term. Based on a net present value analysis, should they accept the contract? Ignore the impact of income taxes.

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