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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
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
$ 5.04$5.04
million per year. Your upfront setup costs to be ready to produce the part would be
$ 7.93$7.93
million. Your discount rate for this contract is
7.9 %7.9%.
a. What is the IRR?
b. The NPV is
$ 5.08$5.08
million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?
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