Internal Rate of Return and Net Present Value Questions

Internal Rate of Return and Net Present Value Questions

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Internal Rate of Return and Net Present Value Questions

Question Description
1 excel spreadsheet plus 1 paper of 1500 at least

Based on the following information, calculate net present value (NPV), internal rate of return (IRR), and payback for the investment opportunity:

• EEC expects to save $500,000 per year for the next 10 years by purchasing the supplier.

• EEC’s cost of capital is 14%.

• EEC believes it can purchase the supplier for $2 million.

Answer the following:

• Based on your calculations, should EEC acquire the supplier? Why or why not?
• Which of the techniques (NPV, IRR, or payback period) is the most useful tool to use? Why?

• Which of the techniques (NPV, IRR, or payback period) is the least useful tool to use? Why?

• Would your answer be the same if EEC’s cost of capital were 25%? Why or why not?
• Would your answer be the same if EEC did not save $500,000 per year as anticipated?

• What would be the least amount of savings that would make this investment attractive to EEC?

• Given this scenario, what is the most EEC would be willing to pay for the supplier?

Prepare a memo to the President of EEC that details your findings and shows the effects if any of the following situations are true:

• EEC’s cost of capital increases.

• The expected savings are less than $500,000 per year.
• EEC must pay more than $2 million for the supplier

Internal Rate of Return and Net Present Value Questions

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Excellent Quality 95-100%	Introduction 45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.		Literature Support 91-84  points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.			Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score 50-85%	40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.		83-76  points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.			52-49  points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality 0-45%	37-1 points The background and/or significance are missing. No search history information is provided.		75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.			48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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