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 $4.75 million per year. Yourupfront setup costs to be ready to produce the part would be $7.78million. Your discount rate for this contract is 7.6%.
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?

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Solution a The NPV of the contract is 455010370 4550104 when rounded off to the nearest wholenumber 455 MillionAs per the NPV Rule1 If the NPV of the See Answer

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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 $4.75 million per year. Yourupfront setup costs to be ready to produce the part would be $7.78million. Your discount rate for this contract is 7.6%.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?