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Your factory has been offered a contract to produce a part for a new printer. The contract would last for years and your cash flows
Your factory has been offered a contract to produce a part for a new printer. The contract would last for years and your cash flows from the contract would be $5.19 million per year. Your upfront setup costs to be ready to produce the part would be $8.14 million. Your discount rate for this contract is 7.5%.
a. What does the NPV rule say you should do? The NPV of the project is $___ million. (Round to two decimal places.)
b. If you take the contract, what will be the change in the value of your firm?
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