To: Mr. Leonard Shelton
From:
Date: October 14, 2007
Subject: Analysis of Company A and B Capital Budgeting Project Decision
Introduction
Company C is considering expanding their business and has been in discussions with keep company A and company 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 maximizing the return on their investment.
The following analysis will examine key financial points and projections for company A and company B. The analysis will examine company revenues, expenses, depreciation expense, revenue rate and discount rate. The recommendation to purchase will
establish on the five year projected financials for the companies.
Key monetary Terms
Revenues are a fundamental component of a companies labyrinthine sense sheet. For a company this is the total amount of money authentic by the company for goods sold or services provided during a certain cartridge holder period. It also includes all net sales, exchanges of assets; touch on and any other increase in owners equity and is calculated before 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-cash expense that reduces the value of an asset as a result.
on that point are several accounting methods that are used in order to write off an assets
depreciation cost over the period of its useful life. Because it is a non-cash expense,
depreciation lowers the companys reported lettuce while increasing free cash flow.
The Net register Value (NPV), is the present 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: Orderessay
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