Permalloy (Ni0.8Fe0.2) is an important alloy for magnetic devices. We present calculations of the electronic and magnetic structure of permalloy and of an interdiffused interface between permalloy and copper. We also present the results of calculations of the transport properties of permalloy. We find that the magnetic moments in permalloy are collinear, however, there may be noncollinear moments near an interface between permalloy and copper. We find that the calculated electrical conductivity is very sensitive to the details of the electronic and magnetic structure, however calculations which include relativistic effects yield a value for the conductivity that is in reasonable agreement with experiment.