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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