Your factory has been offered a contract to produce a part for a new printer. The contract would last for

3

years and your cash flows from the contract would be

$4.94

million per year. Your upfront setup costs to be ready to produce the part would be

$7.95

million. Your discount rate for this contract is

8.2%.

a. What does the NPV rule say you should do?

b. If you take the contract, what will be the change in the value of your firm?

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Part 1

a. What does the NPV rule say you should do?

The NPV of the project is

$enter your response here