An Investment Into A Company Essay

1706 Words Sep 20th, 2016 7 Pages
To make an investment into another company, in this case acquiring the largest supplier of the company is a big question. There are various information that would need to be analyzed before making a yes or no decision on the same. The few things the company would like to understand at the 1st step would be the reason behind the same and its financial viability. The different investment measuring tools in this case would be the Net Present Value (NPV), Internal Rate of Return (IRR) and the payback period for the investment opportunity.
Payback period is the real case in this kind of investments. This is particularly because the pay-back period will define the time period required by the company to make good its investments. This calculation will define the company’s opportunity with respect to as to how much time will it take for the company to make good its investments made. This will give us the time frame for which the company’s investment would be in a negative pattern, post which the returns from the company is the net gain.
IRR and NPV are the two most important tools for any business. IRR is the discount rate that would bring all the net present value of all the future cash flows in the investment to zero. Whereas NPV is the value of all the future cash flows discounted to the current time. Higher the IRR the better the project is, as it defines the % of return that we are going to gain on the same.
The various information required for this would be s follows:

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