You have been offered a contract from Comp Co. You will receive $120,000 up front from Comp Co. In exchange, you will provide $50,000 in services each year for 3 years. Your cost of capital is 10%. Find the NPV and IRR of the deal. Should you accept the contract? Explain.

You have been offered a contract from Comp Co. You will receive $120,000 up front from Comp Co. In exchange, you will provide $50,000 in services each year for 3 years. Your cost of capital is 10%. Find the NPV and IRR of the deal. Should you accept the contract? Explain.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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