Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $4.94 million per year. Your upfront setup costs to be ready to produce the part would be $8.04 million. Your discount rate for this contract is 8.4%. a. What is the IRR? b. The NPV is $4.60 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule? a. What is the IRR? The IRR is %. (Round to two decimal places.)
Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $4.94 million per year. Your upfront setup costs to be ready to produce the part would be $8.04 million. Your discount rate for this contract is 8.4%. a. What is the IRR? b. The NPV is $4.60 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule? a. What is the IRR? The IRR is %. (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $4.94 million per year. Your upfront setup costs
to be ready to produce the part would be $8.04 million. Your discount rate for this contract is 8.4%.
a. What is the IRR?
b. The NPV is $4.60 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?
a. What is the IRR?
The IRR is %. (Round to two decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa1b232f7-56f6-4bee-80a4-159d549e83b8%2F0f4f9550-602f-445b-8b44-3b6992c8d45a%2Fnmdhsbi_processed.png&w=3840&q=75)
Transcribed Image Text:Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $4.94 million per year. Your upfront setup costs
to be ready to produce the part would be $8.04 million. Your discount rate for this contract is 8.4%.
a. What is the IRR?
b. The NPV is $4.60 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?
a. What is the IRR?
The IRR is %. (Round to two decimal places.)
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