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Is the minimum amount of savings

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A company is considering to purchase a supplier for $2M, expecting to save $500K annually for 10 years. My calculation of NPV and IRR (21%) showed the purchase will be profitable and payback period is 4 years.

Question 1. Is there minimum amount of savings that a company is expecting to get from the investment that will make the investment still attractive and will make the purchase possible?

Question 2. If it is less than the the $500,00 expected savings, will it still be attractive. I made some calculations, and wondering if a 0 NPV is really acceptable. Interpretation of NPV seems to be too good and I can't find an article proving that NPV of 0 is an indication that acquiring this supplier is a good investment. So, no savings ( or as long as it's not a negative) will still indicate that buying the supplier is still a good investment?

Question 3. Could you please include references?

Reference no: EM132587230

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