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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 $ 5.03 million per year. Your?up-front setup costs to be ready to produce the part would be $8.01 million. Your discount rate for this contract is 7.7 %.

a. What is the IRR??

b. The NPV is $ 5.02 ?million, which is positive so the NPV rulesays to accept the project. Does the IRR rule agree with the NPV?rule?

Answer & Explanation Solved by verified expert
3.8 Ratings (659 Votes)
aThe internal rate of return is defined as the interest ratethat makes the net present value of the future cash flows of aninvestment equal to its initial cash outlayThe IRR is the interest rate r    See Answer
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