What are the irrs of opportunity

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Your firm has been hired to develop new software for the? university's class registration system. Under the? contract, you will receive $492,000 as an upfront payment. You expect the development costs to be $446,000 per year for the next 3 years. Once the new system is in? place, you will receive a final payment of $886,000 from the university 4 years from now.

a. What are the IRRs of this? opportunity? (Hint?: Build an Excel model which tests the NPV at? 1% intervals from? 1% to? 40%. Then zero in on the rates at which the NPV changes? signs.)

b. If your cost of capital is 10%?, is the opportunity? attractive? Suppose you are able to renegotiate the terms of the contract so that your final payment in year 4 will be $1.2 million.

c. What is the IRR of the opportunity? now?

d. Is it attractive at the new? terms?

Reference no: EM132909635

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