Decision Making and Capital Budgeting

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?

What is the most EEC would be willing to pay for the supplier?

 

 

 

 

 

 

Sample Solution

ACED ESSAYS