Ater spending $9,000 on dient-development, you have just been offered a big production contract by...
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Ater spending $9,000 on dient-development, you have just been offered a big production contract by a new dient. The contract will add $198,000 to your rovenues for each of the next five yean and it wili cost you 5102,000 por year to make the oddfional product. You will have to use some existing equament and buy new equipment as wel. The existing equigment is fully depreciated, but could be sold for 551,000 now. If you use it in the project, it will be worthless at the ond of the projoct. You will buy new equipment valued at 529,000 and use the 5 -year Macks achedise to dopreciato it it will be wothess at the end of the project. Your cuntent production manager earnd $34.000 per year. Since she is buty with ongoing projectir, you are planning to thire an assistant at $36.000 per year discount rate is 14.1\%. What is the NPV of the contract? (Note: Assume that the equipment is put into use in year 1 ) Caiculate tha fron eath fowe helow for vears o throush 2 . (Round to the nearest dotlar.)
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