3 Question 1 - 10 marks 4 5 6 QI. Infotech Corp. has been offered a ten year contract to supply an industrial customer. After careful study the company has estimated the following data relating to the contract. 8 9 Cost of equipment needed Vorking capital needed 10 Annual cash receipts less cash operating costs 12 Salvage value of equipment at end of the contract $425,000/60 $60 000X00 $78.00000 $5,000/00 13 It is not expected that the contract would be extended beyond the initial contract period, The company's discount rate is 11% 25 16 Required: 18 a). Using the net present value (NPV) method, determine if the contract should be accepted. Round all 19 computations to the nearest collar. Ignore income taxes. (8 marks) 20 21 Items Years tash Inflow Outflo Discount Factor 22 23 24 Present Value 25 26 27 28 296) Based on NPV method, should the contract be accepted ? (1 mark) 30 1 C). Explain why you said yes or no in your answer in (6) above. (1 mark) 2 2