I/ Solve the following questions

Question: read the project and solve

WWW has an opportunity to buy a nearby competitor Amazing Widgets Inc (AW) who currently produces a widget very similar to WWWs product. The deal would be an outright purchase of the company, with all its current equipment, facilities, employees, assets and liabilities, and customer accounts.

Project B Costs and Cashflow Elements Money Out

• AW has asked a price of $121 million, based on their assets, reputation, and annual total income/free cash flow. This number may be negotiable. If WWW did buy AW, the price would be due in year 0.

• AWs current production capacity is similar to WWWs . It might be possible to expand AWs production but that is uncertain at this point and should not be included in your analysis.

Project B Costs and Cashflow Elements Money In

• AW currently sells 23,000 widgets annually, at an ATC of $671 and a market price of $850.

• AW has $1.7 million in annual non-operating fixed costs (The CEOs salary, the accounting department, etc) which could be eliminated if they are bought by WWW.

• An additional cost savings of $17 per widget could be obtained on AWs production at any level by combining raw materials orders with WWWs current orders.

Task

Make sure using NPV, IRR and simple breakeven using a cumulative cash flow curve.