Description
Read one-page HBS case and memo, which discuss whether the Star River Electronics Ltd. should buy an equipment now or wait three years. The attached calculations review the historical performance of the firm, forecast financing requirements for the next two years, estimate Star River’s weighted average cost of capital. The only thing that is left is to analyze the proposed investment in a package machine.
So, based on the given Excel calcs, please write a report on the already calculated data per below instructions:
Talk about NPV and IRR, as according to NPV, the company needs to wait 3 years instead of buying equipment now. Describe how both were calculated and note anything important about your findings. Then, talk about how sensitive was the analysis to the choice of discount rate? Discuss the relation between NPV and discount rate (referring to the graph), with discount rates ranging from 8%-12%. And tell whether a reasonable change in discount rate affect your decision? (aka, not wait 3 years and buy now)