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Your factory has been offered a contract to produce a part for a new printer. The...

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Finance

Your factory has been offered a contract to produce a part for anew printer. The contract would last for 3 years and your cashflows from the contract would be $ 5.15 million per year. Your?up-front setup costs to be ready to produce the part would be $7.92 million. Your discount rate for this contract is 7.7 %.

a. What does the NPV rule say you should? do?

b. If you take the? contract, what will be the change in thevalue of your? firm?

Answer & Explanation Solved by verified expert
3.7 Ratings (527 Votes)
a NPV Rule PARTICULARS YEAR1 YEAR2 YEAR3 A CASH FLOWS in million 515 515 515 BDISCOUNT RATE77 1 11R number of year 0928 0862 08006 DISCOUNTED CASH FLOWS AB in million 4779 4439 4123    See Answer
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