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Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.4 million. Medical Labs...
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.4 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) | $ | 330,000 | $ | 350,000 | $ | 390,000 | |||
| Synergistic benefits (aftertax) | 38,000 | 48,000 | 68,000 | ||||||
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. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.4 million. Medical Labs...
Worldwide Scientific Equipment is considering a cash acquisition
of Medical Labs for $1.4 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) $130,000 $150,000 $190,000 Synergistic benefits
(aftertax) 18,000 28,000 48,000 The cost of capital for the
acquiring...
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