J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,100,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. Use Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.
Years 1â5 6â15 16â20 Cash inflow (aftertax) $450,000 $610,000 $810,000 Synergistic benefits (aftertax) 41,000 61,000 71,000
The cost of capital for the acquiring firm is 11 percent.
a. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Net present value
b. Should the merger be undertaken?
Yes No
J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,100,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. Use Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.
| Years | |||
| 1â5 | 6â15 | 16â20 | |
| Cash inflow (aftertax) | $450,000 | $610,000 | $810,000 |
| Synergistic benefits (aftertax) | 41,000 | 61,000 | 71,000 |
The cost of capital for the acquiring firm is 11 percent.
a. Compute the net present value. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
|
b. Should the merger be undertaken?
| Yes | |
| No |
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Related questions
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.3 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 years. There is no tax loss carryforward. Use Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.
| Years | |||
| 1â5 | 6â15 | 16â25 | |
| Cash inflow (aftertax) | $120,000 | $140,000 | $180,000 |
| Synergistic benefits (aftertax) | 17,000 | 27,000 | 47,000 |
The cost of capital for the acquiring firm is 12 percent.
a. Compute the net present value. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
|
