WestcottSmith is a privately held investment management company. Two other investment counseling companies, which want to be acquired, have contacted WestcottSmith about purchasing their business. Company As price is 2 million. Company Bs price is 3 million. After analysis, WestcottSmith estimates that Company As profitability is consistent with a perpetuity of 300,000 a year. Company Bs prospects are consistent with a perpetuity of 435,000 a year. WestcottSmith has a budget that limits acquisitions to a maximum purchase cost of 4 million. Its opportunity cost of capital relative to undertaking either project is 12 percent.

A) Determine which company or companies (if any) WestcottSmith should purchase according to the NPV rule.

B) Determine which company or companies (if any) WestcottSmith should purchase according to the IRR rule.

C) State which company or companies (if any) WestcottSmith should purchase. Justify your answer.