You Can Account On Us is booming! In fact, so many of your clients have told their friends

 

and colleagues about your amazing accounting firm that you simply cant keep up with demand! You

need something that will be able to organize client data, keep clients informed, etc. So you are left with

really only one option... you need to buy Watson from IBM. Being a good accountant, you wouldn'tt

make such a purchase without first running the numbers. Here is information on Watson:

He is an undefeated Jeopardy champion

There is a rumor going around that Watson was inspired by a onetime IBM accounting intern

Financial data:

Based on the above information please do the following:

Calculate the Accounting Rate of Return for the purchase

Calculate the Payback Period for the purchase

Calculate the Net Present Value for the purchase

There is a considerable chance that the cost of capital could drop to recalculate NPV

There is also a chance the cost of capital could rise to recalculate NPV

Estimate the Internal Rate of Return for the purchase

With the understanding that there is a chance of a and cost of capital, email Mr

Kelly with your analysis and make a recommendation as to whether or not the firm should make

the purchase.

Initial Investment $

Useful life years

Salvage Value $

Upgrade fee at year $

Net Income Generated from Use $

Cost of Capital