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Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your
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 $4.84 million per year. Your upfront setup costs to be ready to produce the part would be $7.84 million. Your discount rate for this contract is 8.1%. 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? a. What does the NPV rule say you should do? The NPV of the project is $ million. (Round to two decimal places.) Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $4.92 million per year. Your upfront setup costs to be ready to produce the part would be $7.91 million. Your discount rate for this contract is 7.7%. a. What is the IRR? b. The NPV is $4.84 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule? a. What is the IRR? The IRR is%. (Round to two decimal places.) You have been offered a unique investment opportunity. If you invest $9,200 today, you will receive $460 one year from now, $1,380 two years from now, and $9,200 ten years from now. a. What is the NPV of the opportunity if the cost of capital is 6.7% per year? Should you take the opportunity? b. What is the NPV of the opportunity if the cost of capital is 2.7% per year? Should you take it now? a. What is the NPV of the opportunity if the cost of capital is 6.7% per year? If the cost of capital is 6.7% per year, the NPV is $. (Round to the nearest cent.)
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