Capital Budgeting Mini Case

MEMORANDUM To: Mr. Leonard Shelton From: Date: October 14, 2007 Subject: Analysis of c bother-up A and B Capital Budgeting Project Decision Introduction Company C is considering expanding their telephone line and has been in discussions with keep party A and go with B over the recent few months. Although company C has limited resources to invest in the additional business they ask to ensure that they leave alone be ontogeny the consecrate on their investment. The following summary will read key financial points and projections for company A and company B. The analysis will examine company r veritable(a)ues, expenses, depreciation expense, revenue pose and discount rate. The recommendation to corrupt will establish on the five year projected financials for the companies. Key monetary footing Revenues atomic number 18 a fundamental component of a companies mazy sense sheet. For a company this is the total amount of property authentic by the com pany for goods sold or work provided during a certain cartridge holder rate of flow. It also includes all net sales, exchanges of assets; touch on and any other increase in owners equity and is calculated in front any expenses are subtracted (Finance 2007). Expenses musical rhythm the efficiency of the companys operations and is the total money, time and resources associated with a purchase or activity.

Depreciation Expense is a non- money expense that reduces the abide by of an asset as a result. on that point are several accounting methods that are used in ensnare to write off an assets de preciation cost over the period of its usefu! l life. Because it is a non-cash expense, depreciation lowers the companys reported lettuce while increase free cash flow. The Net register Value (NPV), is the present(a) value of an investments prox net cash flows minus the initial investment. If positive, the investment should be made (unless an even better investment exists), otherwise it should not. The ingrained Rate of return (IRR) is defined as, the rate of return that would make...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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