J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $6,300,000....
90.2K
Verified Solution
Link Copied!
Question
Finance
J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $6,300,000. 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 | |||||||||
| 15 | 615 | 1620 | |||||||
| Cash inflow (aftertax) | $ | 670,000 | $ | 830,000 | $ | 945,000 | |||
| Synergistic benefits (aftertax) | 63,000 | 83,000 | 93,000 | ||||||
The cost of capital for the acquiring firm is 14 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?
multiple choice
-
No
-
Yes
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.