Accounting problem solving about contact selecting

Essay by np4friendsUniversity, Master'sC, May 2006

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Executive Summary

This report is made to advice EEL organisation about which contract will be preferable for them. Here we have considered all the possibilities in changes in price, inflation. As due to skill labour shortage Eagle Enterprises Ltd has a limitation of doing one project and it will have to outsource the other project. The report analysis is done for both the projects using the tools like NPV and IRR. Each of the method is analysed in detail and the reason why NPV is used as a deceive tool in selecting the project. The assumptions made are stated after introduction. In the report we have taken care of inflation and tax rate. The information has been also described in graphs. The excel sheet attached with this report shows all the calculations done for reaching the final conclusion. Any change made in the sheet one (input sheet) of the excel sheet will change all the sheets and the final result in the sheet three (output sheet).

By taking appropriate assumption, finally we come to result that it is preferable for EEL to take contract 1 under shed and give subcontract 2 to REL. It is also preferable to give subcontract 1 or 2 to REL.


The purpose of this report is to advise the management of EEL whether EEL should accept either or both contracts or alternatives and which one, if any, should be subcontracted to REL. This report analyses both the projects using NPV and IRR. The current scenario of the company suggests that the company can take up only one project due to skill labour shortage. All the costing factors have been taken into consideration using the excel sheet. The excel file contains three sheets 1. The input sheet. 2. The calculation sheet. 3. The output sheet.