Share
Explore BrainMass

# Your company is thinking of acquiring another corporation... calculate projected income, cash flow, net present value, internal rate of return and more.

I'm stuck on calculating the Discounted Payback Period and Modified Internal Rate of Return. Would you please figure them for me? The problem is:
Your Company is thinking of 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 the critical data;

Corporation A:
Revenues = 100K in year one, increasing by 10% each year
Expenses = 20K in year one, inxreasing by 15% each year
Depreciation Expense = 5K each year
Tax Rate = 25%
Discount Rate = 10%

Corporation B
Revenues = 150K in year one, increasing by 8% each year
Expenses = 60K in year one, increasing by 10% each year
Depreciation Expense = 10K each year
Tax Rate = 25%
Discount Rate = 11%

Compute and analyze items (a)-(h) using a Microsoft Excel Spreasheet. Ensure all calculations can be seen in the background of the applicable spreadsheet cells (leave an audit trail for others to see how you arrived at your answers).

a) calculate a 5-year Projected Income Statement (sheet one in my spreadsheet)
b) calculate a 5-year Projected Cash Flow (sheet 2)
c) calculate Net present Value (sheet 3)
d) calculate the Internal Rate of Return (sheet 4)
e) calculate the Payback Period (sheet 5)
f) calculate the Profitability Index (sheet 6)
g) calculate the Discounted Payback Period (sheet 7)
h) calculate the Modified Internal Rate of Return (sheet 8)
i) Based in items (a) through (h), which company would you recommend acquiring?
g) calculate the

Thanks,
Elise

#### Solution Summary

You will find the answer to these puzzling questions inside...

\$2.19