Capital Budgeting Comparison

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Capital Budgeting Comparison
The capital budget team was created to determine which existing other corporation would be the best choice to acquire. The total amount of funds that can be used is $250,000, which either Corporation A or Corporation B can be purchased but not both. Before acquiring another group to implement with the exist organization, a detailed analysis of data is to be done. An example of this is when ServiceMaster acquired Certified Systems Inc. or CSI, which was America’s ninth largest professional employer organization or PEO (Buchan, 1997). According to the article ServiceMaster acquires Professional Employer Organization, acquiring a company “is consistent with our plan to enter new markets with high growth potential, low capital requirements, recurring revenue streams, and a strong emphasis on people." That article also shows that about 1,000 of the professional employer organizations in that business industry provides not even five percent of the possible $1 trillion PEO needs to service the needs of the industry and the community. So such analyses could interpret the benefits to the 6.5 million ServiceMaster consumers with such an acquisition (Buchan, 1997).
Define, Analyze, Interpret Answers
With the ServiceMaster as an example acquiring another organization, the team will analyze the acquisition of either Corporation A or Corporation B. The team conducted an analysis of income, cash flow, net present value and internal rate of return. The first step to analyze the effectiveness of both corporations is to compare the current status of each organization’s net income. The net income for Corporation A was $87,997 whereas the net income for Corporation B was $97,763. This is important because Corporation B show a stronger manner to bring revenue to the existing organization. The next step is to compare the cash flow between the…...

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