Problem 8 is this: Your factory has been offered a contract to produce a part for a new printer. The contract would be for three years and your cash flows from the contract would be $5 million per year. Your up-front setup costs to be ready to produce the part would be $8 million. Your cost of capital for this contract is 8%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the charge in the value of your firm? I have to answer this question: Does the IRR rule agree with the NPV rule in problem above? Show me the steps if whether the IRR rule agrees with NPV rule

Problem 8 is this: Your factory has been offered a contract to produce a part for a new printer. The contract would be for three years and your cash flows from the contract would be $5 million per year. Your up-front setup costs to be ready to produce the part would be $8 million. Your cost of capital for this contract is 8%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the charge in the value of your firm? I have to answer this question: Does the IRR rule agree with the NPV rule in problem above? Show me the steps if whether the IRR rule agrees with NPV rule

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1.5
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