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, The following is your critical data:

Corp. 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% Corp. 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% **********************WHAT IS REQUIRED****************************** For both companies (show separate calculations for each company) calculate: 1) A 5 year projected income statement 2) A 5 year projected cash flow 3) Net Present Value 4) Internal Rate of Return 5) Payback Period 6) Profitability Index 7) Discounted Payback Period 8) Modified Internal Rate of Return 9) Based on items 1 through 8, which company should you acquire?

Corp. 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%

Corp. 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%