ACCT614 Colorado Technical Wk 8 EEC Net Present Value and IRR Worksheet

Deliverable Length:

1 Excel spreadsheet and 1 paper of 1,500-2,000 words

Points Possible:

75

Description:

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./

Excel worksheet for these calculations are under learning materials for Homework 08.

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?

Deliverable Length:

Paper length 400-600 words – NO SLIDES

Points Possible:

75

Description:

Part 1

Your boss recently attended an accounting seminar at which the balanced scorecard was discussed. He has asked you to prepare a presentation for the next manager’s meeting about the balanced scorecard and how EEC might adopt it. In your presentation, you should complete the following:

• Define the elements that might be presented in a balanced scorecard.
• Explain how the elements will be used.
• Make a recommendation of whether or not EEC should adopt the balanced scorecard.
• If adopted, how might it improve the company?

Part 2

The President of EEC realizes that the balanced scorecard translates an organization’s mission and strategy into operational objectives and performance measures. You received an e-mail from him asking you to include information in the PowerPoint presentation about tying compensation to performance measures. Discuss the following:

• Describe unethical behavior that can result if the wrong performance measures are used to tie performance measures to compensation.
• How can EEC avoid these behaviors?
• How should EEC tie performance measures to compensation?
• Who is responsible for establishing the performance measures?