J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,100,000....
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Accounting
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 | |||
| 15 | 615 | 1620 | |
| 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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