Qrb 501 Week 6 Capital Budgeting Caseq

QRB 501 WEEK 6 CAPITAL BUDGETING CASE

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PRODUCT 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...