Your firm has been hired to develop new software for the university’s class registration
Your firm has been hired to develop new software for the university’s class registration system. Under the contract, you will receive $500,000 as an upfront payment. You expect the develop- ment costs to be $450,000 per year for the next three years. Once the new system is in place, you will receive a final payment of $900,000 from the university four years from now. a. What are the IRRs of this opportunity? 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 million. c. What is the IRR of the opportunity now? d. Is it attractive at these terms?
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