Question: Motorola Mobility LLC is a company that develops mobile devices. Headquartered in Chicago, Illinois, United States, the company was formed on January 4, 2011 by

Motorola Mobility LLC is a company that develops mobile devices. Headquartered in Chicago, Illinois, United States, the company was formed on January 4, 2011 by the split of Motorola Inc. into two separate companies; Motorola Mobility took on the company's

consumer-oriented product lines, including its mobile phone business and its cable modems and set-top boxes for digital cable and satellite television services, while Motorola Solutions retained the company's enterprise-oriented product lines. Early 2012, Google decided to purchase Motorola mobility LLC for $12.5b. Google had a plan to keep Motorola mobility for 5 years. Google financial analysis team made the following forecasts:

Year

Cash flow(in billions)

Net income (in billions)

2012

1.5

1

2013

2.5

2

2014

4

3

2015

3

2

2016

6 (includes 3.5b selling price)

1.5

And that the average book value of asset is $8b and Googles required rate of return is its WACC.

1- Calculate the average accounting return (AAR). If you know that the required average accounting return is 25%. Would you accept that project?

2- Calculate profitability index of the above project. Would you accept or reject that deal? Why?

NEED 1 AND 2 PLEASE. PLEASE WORK OUT ON EXCEL. THANK YOU.

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