Purchase Solution

Capital Budgeting

Not what you're looking for?

Ask Custom Question

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 options. The following are your critical data:
a. Corporation A:
1) revenues = 100K in year one, increasing by 10% each year.
2) Expenses - 20K in year one, increasing by 15% each year
3) Depreciation expense = 5K each year
4) Tax rate = 25%
5) Discount Rate = 10%
b. Corporation B:
Revenues = 150K iin year one, increasing by 8% each year
Expenses = 60K in year one, increasing by 10% in each year
3) Depreciation Expense = 10K each year
4) Tax Rate = 25%
Discount Rate = 11%

You must compute and analyze items a through h using a Microsoft Excel spreadsheet. Make sure all calculations can be seen in the background of the applicable spreadsheet cells.
c) a 5-year projected income statement
d) a 5-year projected case flow
e. Net present value
f. Internal rate of return
g. Payback period
h. Profitability Index
i. Discounted payback period
j. Modified internal rate of return
k. Based on items a through h, which company would you recommend acquiring?

Purchase this Solution

Solution provided by:
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
Recent Feedback
  • "Your explanation to the answers were very helpful."
  • "What does 1 and 0 means in the repair column?"
  • "Went through all of the formulas, excellent work! This really helped me!"
  • "try others as well please"
  • "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution

Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.