Question
In: Finance
Your firm has been hired to develop new software for the university's class registration system. Under...
Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $492,000 as an upfront payment. You expect the development costs to be $439,000 per year for the next 33years. Once the new system is in place, you will receive a final payment of $865,000 from the university 4 years from now.
a. What are the IRRs of this opportunity? (Hint: Build an Excel model which tests the NPV at 1% intervals from 1% to 40%. Then zero in on the rates at which the NPV changes signs.)
b. If your cost of capital is 10 ,is the opportunity attractive Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4will be $1.2million.
c. What is the IRR of the opportunity now?
d. Is it attractive at the new terms?
Solutions
Expert Solution
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
jeff jeffy answered 1 month agoRelated Solutions
Your firm has been hired to develop new software for the? university's class registration system. Under...
Your firm has been hired to develop new software for the?
university's class registration system. Under the? contract, you
will receive
$505,000
as an upfront payment. You expect the development costs to
be
$433,000
per year for the next
33
years. Once the new system is in? place, you will receive a
final payment of
$834,000
from the university
44
years from now.
a. What are the IRRs of this?
opportunity???? (Hint: Build an Excel model which tests the NPV...
Your firm has been hired to develop new software for the university's class registration system. Under...
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university's class registration system. Under the contract, you
will receive $501,000 as an upfront payment. You expect the
development costs to be $436,000 per year for the next 3 years.
Once the new system is in place, you will receive a final payment
of $847,000 from the university 4 years from now. a. What are the
IRRs of this opportunity? (Hint: Build an Excel model which
tests the NPV...
Your firm has been hired to develop new software for the university's class registration system. Under...
Your firm has been hired to develop new software for the
university's class registration system. Under the contract, you
will receive
$ 506 comma 000
as an upfront payment. You expect the development costs to
be
$ 433 comma 000
per year for the next
3
years. Once the new system is in place, you will receive a
final payment of
$ 833 comma 000
from the university
4
years from now.
a. What are the IRRs of this opportunity? ...
Your firm has been hired to develop new software for the university's class registration system. Under...
Your firm has been hired to develop new software for the
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development costs to be $ 444,000 per year for the next 3 years.
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