Question

Your factory has been offered a contract to produce a part for a new printer. The contract would last for 33 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?

a. What does the NPV rule say you should​ do?

The NPV of the project is: million.  ​(Round to two decimal​ places.)

What should you​ do?  ​(Select the best choice​ below.)

A.The NPV rule says that you should accept the contract because the

NPV less than 0NPV<0.

B.The NPV rule says that you should accept the contract because the

NPV greater than 0NPV>0.

C.The NPV rule says that you should not accept the contract because the

NPV greater than 0NPV>0.

D.The NPV rule says that you should not accept the contract because the

NPV less than 0NPV<0.

b. If you take the​ contract, what will be the change in the value of your​ firm?

If you take the​ contract, the value added to the firm will be: $ million. 

Answer 1

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