OLSC Inc. produces screws and plans to supply Home Manufacturing Inc. with 120,000 cartons of...
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OLSC Inc. produces screws and plans to supply Home Manufacturing Inc. with 120,000 cartons of specialized crews over the next 4 years. The NPV of the current project that supplies 120,000 cartons of screws is about $1.15 million. Home Manufacturing just called and changed its order to 500,000 cartons of specialized screws without changing the price it will pay OLSC for these screws. No additional equipment will need to be purchased to meet the 500,000 carton production. Variable costs will stay the same at the per unit basis but will increase overall given the higher number of cartons needed. How would the NPV of this project with the updated order? O NPV will decrease given the higher overall variable costs NPV will increase given the increase in Revenues NPV will not change and remain about $1.15 million IRR will decrease and drop below the discount rate making the project unacceptable
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