22 Jul WHICH COMPANY WOULD YOU RECOMMEND ACQUIRING?
Your company is thinking about acquirin Show more QRB 501: Capital Budgeting Case Study Capital Budgeting Case Your company is thinking about acquiring another corporation. You have two choicesthe cost of each choice is $250000. You cannot spend more than that so acquiring both corporations is not an option. The following are your critical data: Corporation A Revenues = $100000 in year one increasing by 10% each year Expenses = $20000 in year one increasing by 15% each year Depreciation expense = $5000 each year Tax rate = 25% Discount rate = 10% Corporation B Revenues = $150000 in year one increasing by 8% each year Expenses = $60000 in year one increasing by 10% each year Depreciation expense = $10000 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 Excelspreadsheet; 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 1050 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. – F does not have to be completed. I just want to check if my answers are correct. Show less
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