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Describe the relationship between npv and irr

Assignment:

I am thinking about aquiring another corperation.

I have two choices; the cost of each is $250,000.

I can not spend more than that, so acquiring both corperations is not an option.

The following is my critical data I have put togther for each:

Corperation 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%

Corperation B:

Revenues= 150K on 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%

I need to cumpute and analyze items (a) through (h) using a microsoft spreed sheet.

Could you please makesure all calculations can be seen in the background of the applicable spreedsheet cell, in other word leave an aduit trail so I can see how you arrived at your calculations.

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 (a) through (h), which company would you recommend?

In one or two pages could you define, analyze, and interpret your answers in items (c) through (h) with a rational behind each item and why it supports your decision in the company you recommended.

Describe the relationship between NPV and IRR.

Explain how you would analyze projects differently if corperation A & B had unequal projected years.

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