Your firm has been hired to develop new software for theuniversity's class registration system. Under thecontract, you will receive $ 494 comma 000

$494,000 as an upfront payment. You expect the development costs to be $ 445 comma 000

$445,000 per year for the next 3

3 years. Once the new system is inplace, you will receive a final payment of $ 881 comma 000

$881,000 from the university 4

4 years from now.

a. What are the IRRs of thisopportunity?(Hint: Build an Excel model which tests the NPV at1% intervals from1% to40%. Then zero in on the rates at which the NPV changessigns.)

b. If your cost of capital is 10 %

10%, is the opportunityattractive?

Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4

4 will be $ 1.2

$1.2 million.

c. What is the IRR of the opportunitynow?

d. Is it attractive at the newterms?

a. What are the IRRs of thisopportunity?(Hint: Build an Excel model which tests the NPV at1% intervals from1% to40%. Then zero in on the rates at which the NPV changessigns.)

The IRRs of the project in ascending order are

nothing

% and

nothing

%. (Round to two decimalplaces.)

b. If your cost of capital is 10 %

10%, is the opportunityattractive?

If your cost of capital is 10 %

10%, the opportunity

is attractive

is not attractive

. (Select from thedrop-down menu.)

Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4

4 will be$ 1.2

$1.2 million.

c. What is the IRR of the opportunitynow? (Select the best choicebelow.)

A.

Now there are 3 IRRs.

B.

Now there are no IRRs.

C.

The IRR rule works as before.

D.

The IRR rule always gives the wrong answer.

d. Is it attractive at the newterms?

If your cost of capital is 10 %

10%, the opportunity

is not attractive

is attractive

. (Select from thedrop-down menu.)