Question

Subject: Corporate Finance

1. Please provide detailed Microsoft Corporation's Capital Budgeting Analysis :-

a. Brief History of Microsoft company

b. Current and Future Key issues that impact the Technology Industry, Microsoft Corporation both locally and globally

* c. The detailed Microsoft corporation's Capital Budgeting analysis such as NPV,IRR,PI and Payback etc.

d. Conclusion with at least 2 recommendations following part c detailed analysis, outline Microsoft should pay attention to in order to sustain or improve its overall performance

* hi i have tried many ways to upload the financial data, but there is error of uploading.

Is it ok you can help to get the financial data (Microsoft's Annual Report 2018) from www.microsoft.com. ? sorry to trouble you

Answer 1

1.

a) Brief History of Microsoft:- Microsoft is an MNC or Multinational Corporation working mostly on computer technologies and related technological work. It was founded by Bill Gates and Paul Allen on April 4, 1975. in Albuquerque in New Mexico.

In 1980, Microsoft formed a partnership with IBM to make an operating system for IBM computers. In 1985 IBM requested to make a separate OS for their computers called "OS/2". In that time parallel way, they marketed their own OS called "Windows". In 1990 windows overshadows OS/2 and capture 90% of market share.

In 1989 they launched their most successful product "Microsoft Office". 1992 they released Windows 3.1. In 1993 Microsoft became widely used GUI OS in the world. In 1994 Microsoft changed their slogan to "Where do you want to go today?" to attract the non-technological backgrounded people.

In 1995 they released Microsoft BOB a GUI for novice computer users. In 1996 they discontinued production for bad sales. 1995 introduced the "Start" button. In August 1995 they introduced "Internet Explorer". In 2000 they launched Windows 2000. In 2001 they introduced Xbox in the game console market. In 2005 they introduced the second model of play console Xbox 360.

In 2007 they introduced Windows Vista, Office 20017. In 2008 did a $500 million deal with Viacom for content sharing and advertising. In 2011 they acquired Skype Technologies for US $8.5 Million. In July 2012 Microsoft launched the Outlook webmail service. In 2011 they release windows phone.

In 2014 Microsoft acquired Nokia devices and services for $7.2 billion and that year Satya Nadella became CEO of Microsoft. In july 2015 they released Windows 10. In 2018 they partner with Toyota for creating a fish farming IoT tool using Microsoft Azure.

b) Key issues faces by Microsoft;

• Lack of Innovation:- As a product based org. they always need some innovation to stay in the market.
• Search Engine:- Bing lacks behind Google. 86% uses Google where only 11% uses Bing
• Bad Mobile Operating System than Android or iPhone.
• Out of touch with customers. Not that much connected with their consumer.

c)

Years	2018	2017	2016	2015
Cash Flow ($ Billion)	43.8	39.5	33.3	29.7
Growth Rate from Previous Year	10.88%	18.6%	12.12%	NA

So, Average Growth Rate = (10.88 + 18.6 + 12.12) / 3 = 13.87%

WACC = 15%

So, From Gordon Model of NPV with growth in cash flow =    = 3876.1

So, NPV = $ 3876.1 Billion for future cash flow with a growth of 13.87%