What are the irrs of this opportunity

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Reference no: EM132037959

Your firm has been hired to develop new software for the university's class registration system. Under the contract, you will receive $497,000 as an upfront payment. You expect the development costs to be $441,000 per year for the next 3 years. Once the new system is in? place, you will receive a final payment of $866,000 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: EM132037959

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