Capital Budgeting
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- Date Submitted: 04/19/2011 10:28 AM
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Capital budgeting
Acquisition investment
HP should invest in an acquisition investment with Washington Electronics Corporation. Even though PH is among the upcoming electronic and technology company, its projected annual revenues ranges within $800,000 bracket. In the course of merging and other activities, there are substantial problems that are associated with the decision. Just like any other merging activity, in order to estimate the entire cash flow required. Politics problems are among the problems that might emanate from the investment plan. There are two organization committee thus getting them understand what you are planning is quite a problem. One committee might be willing to the process of calculating cash flows and the other committee might be opposing.
The annual cost levels projected by HP for Washington Electronics Corporation is about $400,000 although it’s a smaller company compared to HP. Incase the company succeeds to make its acquisition successful, those proposed annual costs will automatically reduce say by $100,000. If the inflation rate will act in an indefinite state, the projected growth for the entire activities such as revenues, cost incurred in the course of its merge and some cost reductions associated here and there, rate will be 10% (g=.10). Growth rate is among the key considerations that mangers look at in order to determine their businesses are growing or not. If one company has a different growth rate with the other, this tends to be tedious and difficult in amortizing the entire estimate.
In our setting, HP and the company it wants to merge with have similar corporate marginal tax rate. They operate under the 40% bracket although one is little big than the other one. Our corporate marginal income tax rate will be (c=.40). So as to have a complete merging process, shareholders of the company to be acquainted should be compensated. This is another great challenge in estimating the cash flow investments simply because...
Acquisition investment
HP should invest in an acquisition investment with Washington Electronics Corporation. Even though PH is among the upcoming electronic and technology company, its projected annual revenues ranges within $800,000 bracket. In the course of merging and other activities, there are substantial problems that are associated with the decision. Just like any other merging activity, in order to estimate the entire cash flow required. Politics problems are among the problems that might emanate from the investment plan. There are two organization committee thus getting them understand what you are planning is quite a problem. One committee might be willing to the process of calculating cash flows and the other committee might be opposing.
The annual cost levels projected by HP for Washington Electronics Corporation is about $400,000 although it’s a smaller company compared to HP. Incase the company succeeds to make its acquisition successful, those proposed annual costs will automatically reduce say by $100,000. If the inflation rate will act in an indefinite state, the projected growth for the entire activities such as revenues, cost incurred in the course of its merge and some cost reductions associated here and there, rate will be 10% (g=.10). Growth rate is among the key considerations that mangers look at in order to determine their businesses are growing or not. If one company has a different growth rate with the other, this tends to be tedious and difficult in amortizing the entire estimate.
In our setting, HP and the company it wants to merge with have similar corporate marginal tax rate. They operate under the 40% bracket although one is little big than the other one. Our corporate marginal income tax rate will be (c=.40). So as to have a complete merging process, shareholders of the company to be acquainted should be compensated. This is another great challenge in estimating the cash flow investments simply because...