QUESTION 13 Your company has been offered a contract to produce parts for a new cellphone. The contract would last for 4 years and your cash flows from the contract will be $6 million per year starting next year. Your upfront setup costs to be ready to produce the parts are $10.8 million. Your discount rate for this contract is 17.9%. What is the NPV of the project? $2.27 million -$5.71 million $5.37 million $8.01 million
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PV = CF1 / (1 + r)^1 + CF2 / (1 + r)^2 + CF3 / (1 + r)^3 + CF4 / (1 + r)^4 Where: PV = Present value CF1 = Cash flow in year 1 CF2 = Cash flow in year 2 CF3 = Cash flow in year 3 CF4 = Cash flow in year 4 r = Discount rate In this case, CF1 = $6 million, CF2 = Show more…
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