Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Atlantic Corporation is considering the purchase of the linerboard mill and corrugated box plants of Royal Paper for a total price of $260 million. The estimated incremental cash flows that would result if Atlantic acquired the facilities are presented below. Atlantic's marginal tax rate is 36% and their after-tax cost of capital is 13%.a)
-
- Calculate the NPV, IRR, and payback period for the acquisition and indicate what you think Atlantic should do
Transcribed Image Text:(in $ Millions)
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
ΕΒΙAΤ
20.1
28.4
41.6
36.9
38.7
43.4
50.3
58.2
62.5
67.0
Depreciation
20.9
28.3
35
39.3
41.3
39.3
34.3
27.1
26.3
25.3
Operating Cashflows
41.0
56.7
76.6
76.2
80.0
82.7
84.6
85.3
88.8
92.3
САРЕХ
(19.2) (30.5) (41.7) (10.2) (10.2) (8.2)
(5.0)
(6.2) (6.2)
(5.0) (4.0)
(4.2)
(6.0)
(4.2)
(5.0)
NWC
(9.0) (16.0) (10.0)
(4.0) (5.0)
Ter
minal Value
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0 381.5
Free Cash Flows
12.8
10.2
24.9
61.0
65.8
69.5
73.4
75.1
78.6 464.6
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