Apple estimates that the demand for one of its tablets in 2023 will be uniform between 10 million and 16 million. Apple wants to sign a contract with a company producing lenses for the cameras. The company asks for $18/unit for each unit under this contract. If Apple needs more lenses in 2023, beyond what it contracted with this company, it estimates that it can find it in the spot market for $24.00/unit.

Apple estimates that the demand for one of its tablets in 2023 will be uniform between 10 million and 16 million. Apple wants to sign a contract with a company producing lenses for the cameras. The company asks for $18/unit for each unit under this contract. If Apple needs more lenses in 2023, beyond what it contracted with this company, it estimates that it can find it in the spot market for $24.00/unit.

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually...

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Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $5.00 million per year. Your upfront setup costs to be ready to produce the part would be $8.00 million. Your discount rate for this contract is 8.0%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? Question content area bottom Part 1 a. What does the NPV rule say you should do? The NPV of the project is $ enter your response here XX million. (Round to two decimal places.)
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