Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $ 508 comma 000

Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $ 508 comma 000 as an upfront payment. You expect the development costs to be $ 438 comma 000 per year for the next 3 years. Once the new system is in place, you will receive a final payment of $ 846 comma 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 at 1% intervals from 1% to 40%. Then zero in on the rates at which the NPV changes signs.) b. If your cost of capital is 10 %, is the opportunity attractive? Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4 will be $ 1.2 million.

c. What is the IRR of the opportunity now?

d. Is it attractive at the new terms?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Canadian Multinationals And International Finance

Authors: Gregory P. Marchildon, Duncan McDowall

1st Edition

0714634816, 978-0714634814

More Books

Students also viewed these Finance questions

Question

1. Identify three communication approaches to identity.

Answered: 1 week ago

Question

d. Who are important leaders and heroes of the group?

Answered: 1 week ago

Question

3. Describe phases of minority identity development.

Answered: 1 week ago