Asset acquisition decision Zain Printing Company is considering the acquisition of Freiman Press at a...
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Asset acquisition decision Zain Printing Company is considering the acquisition of Freiman Press at a cash price of $50,000. Freiman Press has liabilities of $94,000. Freiman has a large press that Zarin needs; the remaining assets would be sold to net $66,000. As a result of acquiring the press, Zarin would experience an increase in cash inflow of $28,000 per year over the next 13 years. The firm has a 12% cost of capital.
- What is the effective or net cost of the large press?
- If this is the only way Zarin can obtain the large press, should the firm go ahead with the merger?
- If the firm could purchase a press that would provide slightly better quality and $33,000 annual cash inflow for 13 years for a price of $100,000, which alternative would you recommend?
a. The effective or net cost of the large press is $ (Round to the nearest dollar.)
Asset acquisition decision Zain Printing Company is considering the acquisition of Freiman Press at a cash price of $50,000. Freiman Press has liabilities of $94,000. Freiman has a large press that Zarin needs; the remaining assets would be sold to net $66,000. As a result of acquiring the press, Zarin would experience an increase in cash inflow of $28,000 per year over the next 13 years. The firm has a 12% cost of capital.
- What is the effective or net cost of the large press?
- If this is the only way Zarin can obtain the large press, should the firm go ahead with the merger?
- If the firm could purchase a press that would provide slightly better quality and $33,000 annual cash inflow for 13 years for a price of $100,000, which alternative would you recommend?
a. The effective or net cost of the large press is $ (Round to the nearest dollar.)
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