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Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.6 million. Medical...

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Finance

Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.6 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
15 615 1625
Cash inflow (aftertax) $ 350,000 $ 370,000 $ 410,000
Synergistic benefits (aftertax) 40,000 50,000 70,000

The cost of capital for the acquiring firm is 10 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.)

b. Should the merger be undertaken?

multiple choice

  • Yes

  • No

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