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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
1–5 6–15 16–25
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.)

Net present value

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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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Please show work for both problems and I will give a thumbs up!

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Determining My Life Insurance Needs (page 353)
NOTE: Results here may differ slightly than when using Appendix A in text due to rounding.
Factors Affecting Need
Sample Only
Insert Your Own Figures
1. Income-replacement needs*
$823,219
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$ 12,000
3. Readjustment-period needs
$ 19,000
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$ 10,000
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$ -
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$ 939,219
8. Government benefits**
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$0
10. Current Life Insurance In Place
$ 98,000
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Current Annual Income
$56,000
Percent of Annual Income To Be Replaced
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Annuity Amount (% desired of annual income)
$42,000
i (assumed interest rate
3.00%
n (number of annuity payments)
30
PV (present value) of Income Replacement Needs
$823,219
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$2,725.00
Estimated Annual Benefit
$32,700
i (assumed interest rate
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n (number of annuity payments)
15
PV (present value) of Government Benefits
$390,370

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