# Qrb 501 Week 1 Capital Budgeting Case

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Qrb 501 Week 1 Capital Budgeting Case
Capital Budgeting Case
Learning Team A
July 29, 2014
Dr. Larry Olanrewaju
Capital Budgeting Case
Our Company has the opportunity to obtain another corporation. We have to choose between two companies, Company A or Company B. We only have \$250,000 to spend to purchase the companies. Because of this financial constraint, acquiring both corporations is not an option. Therefore, we must determine what company would be better to acquire.
Company A
Company A started with \$250,000 and increased in revenue by 10% each year up to 5 years. Therefore, at the end of 5 years the revenue totaled \$146,410. We subtracted the annual expenses from the yearly revenue to determine the profit before depreciation or the profit before the drop in value. Depreciation moves the cost of an asset to depreciation expense during the asset 's useful life. Depreciation expense results when the purchase price of a fixed asset is reduced over time, or its useful life (Keown, Martin, & Petty, 2014). In Corporation A, the Depreciation expense is \$5,000 a year. We deducted the \$5,000 year depreciation from the profit to obtain the profit before tax. The tax rate of 25% was deducted from the profit before tax to find the net income. The 5 Year Projected Cash Flow is the net income plus the
Therefore, at the end of 5 years the revenue totaled \$204,073. We subtracted the annual expenses from the yearly revenue to determine the profit before depreciation or the profit before the drop in value. In Corporation B, the Depreciation expense is \$10,000 a year. We deducted the \$10,000 year depreciation from the profit to obtain the profit before tax. The tax rate of 25% was deducted from the profit before tax to find the net income. The 5 Year Projected Cash Flow is the net income plus the \$10,000 annual depreciation

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