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Your factory has been offered a contract to produce a part for a new printer....

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Accounting

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 $5.03 million per year. Your upfront setup costs to be ready to produce the part would be $7.93 million. Your discount rate for this contract is 7.9%.

a. What is the IRR?

b. The NPV is $5.06 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule?

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