How can I determine whether the potential revenue increase/ cost decrease exceeds the price of acquisition/investment (NPV analysis)?
For example, we plan to make an investment of $100M and expect a 5% cost decrease (equals $2M in additional profit yearly) , would I calculate as follows?
$2M/(10%- 5%)= $40M
10% would be the assumed discount rate. And in this case our NPV would be -$60M, hence we should not invest in the cost reduction?