Company is acquiring another corporation. We have two choices; the
cost of each choice is $250,000. maximum, so acquiring both
corporations is not an option. The following is critical data:
Corporation A:
Revenues = 100K in year one, increasing by 10% each year.
Expenses = 20K in year one, increasing 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) through (h) using a Microsoft Excel
spreadsheet. Make sure that all calculations can be seen in the
background of the applicable spreadsheet cells. Please show the
formula. Items (i) show work
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
i. Based on items (a) through (h), which company would you recommend acquiring?
Thanks |