Purchase Solution

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

Not what you're looking for?

Ask Custom Question

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

Attachments
Purchase this Solution
Solution Summary

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

Purchase this Solution
Free BrainMass Quizzes
Understanding Management

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

Lean your Process

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

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.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

View More Free Quizzes
Related BrainMass Solutions

  • Capital Budgeting Mini-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.

  • Acquiring another Corporation

    A 5-year projected cash flow c. Net Present Value d. Internal Rate of Return e. Payback Period f. Profitability Index g. Discounted Payback Period h. Modified Internal Rate of Return i.

  • Capital Budgeting

    23200 Capital Budgeting - Your company is thinking about acquiring another corporation. Your company is thinking about acquiring another corporation. You have two choices: the cost of each choice is $250,000.

  • Captial Budgeting Case

    A 5-year projected income statement d. A 5-year projected cash flow e. Net Present Value f. Internal Rate of Return g. Payback Period h. Based on items (a) through (g), which company would you recommend acquiring? i.

  • Capital Budgeting Integral Projections

    The solution calculates a 5-year projected income statement, a 5 year projected cash flow, net present value, internal rate of return, payback period, profitability index, discounted payback period and modified internal rate of return.

  • NPV, IRR, Profitability Index and Payback

    55873 Net Present Value, Internal rate of return, Profitability Index and Payback 18. You are thinking about acquiring a new company. The company is at a bargain asking price of $400,000.

  • Superior Manufacturing - Pay Back Period

    Calculate the payback period, net present value, internal rate of return, and modified rate of return for a proposed capital budgeting project. Superior Manufacturing is thinking of launching a new product.

  • Calculation of various items for two corporations

    a) A 5 year Projected Income Statement b) A 5 year Projected Cash Flow c) Net Present Value d) Internal Rate of Return e) Payback Period f) Profitability Index g) Discounted Payback Period h) Modified Internal Rate of Return Based on items

  • Relationship between NPV and IRR

    I am looking for some more detailed information with regard to the relationship between net present value (NPV) and internal rate of return (IRR) (Note: the key factor here is the discount rate used).

View More Related Solutions