Question

Your factory has been offered a contract to produce a part for a new printer. The contract would be for three years and your cash flows from the contract would be $5 million per year. Your up-front setup costs to be ready to produce the part would be $8 million. Your cost of capital for this contract is 8%. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. THIS IS AN EXCEL PROJECT, I NEED THE FORMULAS PLEASE !
a.	What does the NPV rule say you should do?
b.	What does the IRR rule say you should do?
c.	Does the IRR rule agree with the NPV rule in this case?
	Initial investment (million)	$                 8
	Annual cash flow (million)	$                 5
	Number of periods (years)	3
	Cost of capital	8%
a.	What does the NPV rule say you should do?
	NPV (million)
	Make investment (Yes/No)
b.	What does the IRR rule say you should do?
	IRR
	Make investment (Yes/No)
c.	Does the IRR rule agree with the NPV rule in this case?
	NPV & IRR agree (Yes/No)

Answer 1