Futronics Inc. is a $2 billion firm that sells communications services. Founded in 1937, Futronics has provided consumer products, as well as government systems and services, for well over half a century. Due to a sharp increase in competition, flattened sales, and external economic conditions, Futronics is implementing a corporate overhead reduction program. The proposal is to replace the company’s central office stores with outside vendors. The investment will cost $1,000,000 and yield incremental cash flows of $450,000 in year one (1), $350,000 in year two (2), $300,000 in year three (3), and $250,000 in year four (4). There is no salvage value of the asset, and the firm has a cost of capital of 8%.Calculate the net present value, internal rate of return, and simple payback. Next, determine the effect that each of the three (3) values will have on the company.
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