Question: Microsoft is considering acquiring a small tech startup with the following financial details: Acquisition Cost: $500 million Estimated Annual Revenue Increase: $200 million Operating Costs:

  • Microsoft is considering acquiring a small tech startup with the following financial details:
    • Acquisition Cost: $500 million
    • Estimated Annual Revenue Increase: $200 million
    • Operating Costs: $120 million annually
    • Depreciation Expense: $20 million annually
    • Tax Rate: 21%
  • Requirements:
    1. Calculate the annual net income from the acquisition.
    2. Prepare a five-year financial projection for the acquired startup.
    3. Analyze the return on investment (ROI) for the acquisition.
    4. Discuss the strategic benefits of acquiring the startup.
    5. Evaluate the potential risks and integration challenges.

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