# Acquisitions

*label*Accounting

*timer*Asked: Dec 4th, 2015

**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