Acquisitions

FratBro23
Category:
Accounting
Price: $10 USD

Question description

I need help with this excel spreadsheet on this and a brief explaination on the questions.

Based on the following information, calculate net present value (NPV), internal rate of return (IRR), and payback for the investment opportunity:
o EEC expects to save $500,000 per year for the next 10 years by purchasing the supplier.
o EEC’s cost of capital is 14%.
o EEC believes it can purchase the supplier for $2 million.
Answer the following:
o Based on your calculations, should EEC acquire the supplier? Why or why not?
o Which of the techniques (NPV, IRR, or payback period) is the most useful tool to use? Why?
o Which of the techniques (NPV, IRR, or payback period) is the least useful tool to use? Why?
o Would your answer be the same if EEC’s cost of capital were 25%? Why or why not?
o Would your answer be the same if EEC did not save $500,000 per year as anticipated


Tutor Answer

(Top Tutor) Daniel C.
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School: UCLA
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