Answered step by step
Verified Expert Solution
Question
1 Approved Answer
P7-19 (similar to) Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $490,000
P7-19 (similar to) Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $490,000 as an upfront payment. You expect the development costs to be 5433,000 per year for the next 3 years. Once the new system is in place, you will receive a final payment of $849,000 from the university 4 years from now a. What are the Rs of this opportunity? (Hint Bulld an Excel model which tests the NPV at 1% intervals from 1% to 40%. Thenzero in on the rates at which the NPV changes signs.) b. If your cost of capital is 10%, is the opportunity attractive? Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4 will be $1.2 milion c. What is the IRR of the opportunity now? d. is attractive at the new torms? a. What are the IRR of this oportunity? Hint. Build an Excel model which is the NPV at 15 intervals from 1 to 40%. Then zero in on the rates at which the NPV changes sign) The Rs of the project in wscending ordut ure, and % (Round to two decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started