The "King", a well-known rock band from England, is considering signing a new contract with a U.S agency, according to which it agrees to perform there in the next 6 or 7 years. The band has a contract with Enfield club in Liverpool, according to which it performs there each year regularly. For each performance, the band receives $900,000. Should the band sign the contract with the U.S agency, it will need to forgo these revenues and additionally pay the Enfield club an immediate fine of $1,200,000. To perform in the U.S, the band will need to add a new drummer. During the last month, the band members went to multiple concerts of other rock bands to search for a new drummer. The cost of the search was $400,000. In one of these concerts, they discovered a talented drummer named Chad, who was interested in joining them. Chad demanded a yearly salary of $800,000, and in addition, a new state of the art equipment at a cost of $1,000,000. This equipment will be depreciated over 4 years. At the end of the contract, the band estimates that it will be sold for $400,000. The expected revenues from the new contract are $4,000,000 for the first year, and are expected to rise by 10% per year. The ongoing operating expenses (which include marketing, food, travel and accommodation) should amount to $2,000,000 per year. In addition, the band's manager demands an increase of his yearly retainer from $300,000 to $400,000 if the band sign the contract. At the end of the contract, the band will need to fly the remaining equipment at a cost of $500,000. Before signing the contract, the band discovered that they could receive a visa to the U.S for only 6 years. If the band chooses to extend the visas for all the bend members and employees, it will cost $3,000,000. The band's operational tax rate is 30% and their Capital gain tax rate is 20%. The band is profitable and can deduct any expense as a tax shield (having yearly royalties of $10,000,000 from their previous album). All cash flows are year-end, unless stated otherwise. The tours annual discount rate is 15%. a. Should the band sign the contract? b. If the answer to item (a) is yes, for how long?