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 $ 4.97 million per year. Your upfront setup costs to be ready to produce the part would be $ 7.92 million. Your discount rate for this contract is 7.7 %. a. What is the IRR? b. The NPV is $ 4.96 million, which is positive so the NPV rule says to accept the project. Does the IRR rule agree with the NPV rule? a. What is the IRR? The IRR is nothing%. (Round to two decimal places.)
a) IRR is calculated using the RATE function:-
=RATE(nper,pmt,pv)
=RATE(3,-4.97,7.92)
=39.77%
b) NPV:-
=PV(rate,nper,pmt)
=PV(7.7%,3,-4.97)-7.92
=4.96
c) Yes, IRR and NPV agree
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