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University of Phoenix-Capital Budgeting Case-Your company is thinking about acquiring another corporation

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Question;University of Phoenix Material;Capital;Budgeting Case;Your company is thinking about acquiring another;corporation. You have two choices?the;cost of each choice is $250,000. You cannot spend more than that, so acquiring;both corporations is not an option. The following are your critical data;Corporation A;Revenues = $100,000 in year one, increasing by 10% each;year;Expenses = $20,000 in year one, increasing by 15% each year;Depreciation expense = $5,000 each year;Tax rate = 25%;Discount rate = 10%;Corporation B;Revenues = $150,000 in year one, increasing by 8% each year;Expenses = $60,000 in year one, increasing by 10% each year;Depreciation expense = $10,000 each year;Tax rate = 25%;Discount rate = 11%;Compute and analyze items (a) through (d) using a Microsoft?;Excel? spreadsheet. Make sure all calculations can be seen in the;background of the applicable spreadsheet cells. In other words, leave an audit;trail so others can see how you arrived at your calculations and analysis.;Items (a) through (d) should be submitted in Microsoft? Excel?;indicate your recommendation (e) in the Microsoft? Excel?;spreadsheet, the paper stated in item;(f) should be submitted consistent with APA guidelines.;a. A;5-year projected income statement;b. A;5-year projected cash flow;c. Net;present value (NPV);d. Internal;rate of return (IRR);e. Based;on items (a) through (d), which company would you recommend acquiring?;f. Write;a paper of no more 1,050 words that defines, analyzes, and interprets the;answers to items (c) and (d). Present the rationale behind each item and why it;supports your decision stated in item (e). Also, attempt to describe the;relationship between NPV and IRR. (Hint.;The key factor is the discount rate used.);In addition to the paper, a Micosoft? Excel?;spreadsheet showing your projections and calculations must be shown and;attached.

 

Paper#50628 | Written in 18-Jul-2015

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