your factor has been offered a contract to produce a part for a new printer. the...

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Finance

your factor has been offered a contract to produce a part for anew printer. the contract would be for 3 years and your cash flowfrom the contract would be 5 million per year. Your up-front setupcosts to be ready to produce the part would be 8 million. Your costof capital for this contract is 8%
a. what does the npv rule say you should do?
b. if you take the contract what will be the change in the valueof your firm?
c. Does the IRR rule agree with the npv rule?

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3.7 Ratings (640 Votes)

Requirement aNet Present Value NPV of the Project Net Present Value NPV of the Project Present Value of annual cash inflows Present Value of See Answer

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your factor has been offered a contract to produce a part for anew printer. the contract would be for 3 years and your cash flowfrom the contract would be 5 million per year. Your up-front setupcosts to be ready to produce the part would be 8 million. Your costof capital for this contract is 8%a. what does the npv rule say you should do?b. if you take the contract what will be the change in the valueof your firm?c. Does the IRR rule agree with the npv rule?