Your firm has been hired to develop new software for the$$ university's class registration system. Under the$$ contract, you will receive $$505,000$ as an upfront payment. You expect the development costs to be $$451,000$ per year for the next $3$ years. Once the new system is in$$ place, you will receive a final payment of $$888,000$ 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 $$1\mathrm{.}2$ million.$$

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

d$.$ Is it attractive at the new$$ terms?

Question content area bottom

Part $1$

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.$)$

The IRRs of the project in ascending order are enter your response here$\%$ and enter your response here$\%.($Round to two decimal$$ places.$)$