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J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $6,300,000....

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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

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