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Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $ 5 0 8

"Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $508,000 as an upfront payment. You expect the development costs to be $460,000 per year for the next 3 years. Once the new system is in place, you will receive a final payment of $912,000 from the university 4 years from now.
a. What are the IRRs of this opportunity? (Hint: Build an Excel model which tests the NPV at1% intervals from1% to40%. Then zero in on the rates at which the NPV changes signs.)
b. If your cost of capital is 10%, what is the NPV of the opportunity? Is it attractive?
Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4 will be $1.3 million.
c. What is the IRR of the opportunity now?
d. What is the NPV of the opportunity now? Is it attractive at the new terms?"

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