QRB 501 Week 6 Capital Budgeting Case

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Week 6 Capital Budgeting Case Study

Complete the Capital Budgeting Case. The assignment instructions are available in the University of Phoenix Material: Capital Budgeting Case.

 

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Corporation A
Cost of Company $250,000.00
Dicount Rate 10% $25,000.00
Amount Paid for Corp. $225,000.00

 

 

Corporation B
Cost of Company $250,000.00
Dicount Rate 11% $27,500.00
Amount Paid for Corp. $222,500.00

 

Description

QRB 501 Week 6 Capital Budgeting Case,

QRB 501 Week 6 Capital Budgeting Case

Capital Budgeting Case

Five executives at Team A Entertainment would like to expand the company by acquiring another company within a different market. The company has $250,000.00 to spend on the acquisition and the executives have narrowed it down to two corporations. After analyzing the final two corporations in more details the executives must recommend to the board of directors which of the two corporations the company should acquire and outline the details that helped reach this conclusion.

Projected Income Statements

Corporation A shows an increase in revenues over the next five years of 10 percent, and within the same time frame the company expenses will increase by 15 percent. The below income statement shows that Corporation A will maintain a positive net income year over year with a percent change of 41.2 percent from 2014 to 2018.

Corporation A                                                                                                                                                                                                                                                                                                                         Projected Income Statement                                                                                                                                                                                                                                                                                                                                            For Years Ending December 31, 2014 through December 31, 2018
Projected 2014 Projected 2015 Projected 2016 Projected 2017 Projected 2018
Revenue  $        110,000  $           121,000  $         133,100  $         146,410  $          161,051
Operating Expenses
    Operating Expense              23,000                26,450               30,418               34,980               40,227
    Depreciation Expense                5,000                  5,000                5,000                 5,000                 5,000
Total Expenses              28,000                31,450               35,418               39,980               45,227
Income Before Taxes              82,000                89,550               97,683             106,430             115,824
Tax Expense              20,500                22,388               24,421               26,607               28,956
Net Income (loss)  $          61,500  $            67,163  $           73,262  $           79,822  $           86,868

 

Corporation B shows an increase in revenues over the next five years of 8 percent, and within the same time frame the company expenses will increase by 10 percent. The below income statement shows that Corporation B will also maintain a positive net income year over year with a percent change of 32.3 percent from 2014 to 2018.

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