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Essay / Research Paper Abstract
A 2 page narrative explaining figures contained in an accompanying spreadsheet. Two companies are available for possible acquisition; the price of each is $250,000. The purpose is to assess NPV, IRR, FV, payback and discounted payback to choose which company would be the better investment. Includes 2 tables. Bibliography lists 2 sources.
Page Count:
2 pages (~225 words per page)
File: CC6_KSacctNPVpayb.rtf
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Unformatted sample text from the term paper:
are available for possible acquisition; the price of each is $250,000. The purpose here is to choose which company would be the better investment. Analysis
Calculations for NPV, IRR, FV, payback, discounted payback and profitability index can be found on the accompanying spreadsheet. The values for each of those measures are
presented in the tables below. Company A Company B NPV 44.04 16.76 IRR 3% 5% FV 70.92 24.62 Payback 5yrs
-44 5yrs -17 Profitability Index 218.52 237.24 Year Payback Discounted Payback
Company A Company B Company A Company B 0 -250 -250 -250 -250 1 -199 -192 -194 -187 2 -154 -140 -139 -126 3 -113 -94 -85 -69 4 -77
-53 -32 -13 5 -44 -17 21 40 The NPV is positive for each option,
so neither can be rejected out of hand based on NPV. Either companys payback occurs in the same year; Company Bs occurs earlier in the year.
The fact that each company is assessed on a 5-year projection simplifies the analysis. Had they been based on 5- and 7-year projections, NPV, IRR
and payback calculations would need to include two extra years for Company B. Conclusion Most measures appear to be quite similar for the
two companies, and of course they are the price. Company B is the better investment, however. This determination is based on the fact that its payback period is
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