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

33

years and your cash flows from the contract would be

$ 5.24$5.24

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

$ 7.82$7.82

million. Your discount rate for this contract is

7.6 %7.6%.

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?