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The senior VP in charge of your area asked you to recommend the purchase of a new, expensive asset for the firm. You assemble a
The senior VP in charge of your area asked you to recommend the purchase of a new, expensive asset for the firm. You assemble a team to help you. Your goal is to find the three top options for solving the problem, estimate the cash improvements /inflows (in terms of cash coming in or cost savings) and cash decrements/outflows (cash outflows with the purchase/ use of the asset).
- Describe the problem and how it can be resolved. (Company needs an ERP computer system)
- Determine three options that can solve the problem. (Oracle, SalesForce, SAP)
- Estimate realistic cash flows associated with three different options in purchasing the asset.
- Compute the following for each alternative:
- Payback
- Accounting Rate of Return
- Net Present Value (10% hurdle rate) (Best measure is the one with the highest positive NPV or the lowest negative NPV)
- Internal Rate of Return
- Present Value Index
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