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

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Finance

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 $5.16 million per year. Your upfront setup costs to be ready to produce the part would be $8.15 million. Your discount rate for this contract is 7.7%.

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?

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