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
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
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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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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