Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.8 million. Medical...
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Finance
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.8 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)
$
170,000
$
190,000
$
230,000
Synergistic benefits (aftertax)
22,000
32,000
52,000
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.)
b. Should the merger be undertaken?
multiple choice
Yes
No
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