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Firm ABC Ltd is planning a takeover of XYZ Ltd, which operates in a different industry from ABC. The takeover will cost $43.5 million, and is expecte generate additional cash flow of $3.6 million per year in perpetuity. Shown below are the Weighted Average Cost of Capital of the two firms. Firm WACC АВС 10.6% XYZ 5.2%

Firm ABC Ltd is planning a takeover of XYZ Ltd, which operates in a different industry from ABC. The takeover will cost $43.5 million, and is expecte generate additional cash flow of $3.6 million per year in perpetuity. Shown below are the Weighted Average Cost of Capital of the two firms. Firm WACC АВС 10.6% XYZ 5.2%

Essentials Of Investments
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
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Firm ABC Ltd is planning a takeover of XYZ Ltd, which operates in a different industry from ABC. The takeover will cost $43.5 million, and is expected to generate additional cash flow of $3.6 million per year in perpetuity. Shown below are the Weighted Average Cost of Capital of the two firms. Firm WACC АВС 10.6% XYZ 5.2% What is the NPV of the acquisition of XYZ Ltd? O a. $-5.24 million O b. $25.73 million O c. $30.53 million O d. $-9.54 million Clear my choice
Transcribed Image Text:Firm ABC Ltd is planning a takeover of XYZ Ltd, which operates in a different industry from ABC. The takeover will cost $43.5 million, and is expected to generate additional cash flow of $3.6 million per year in perpetuity. Shown below are the Weighted Average Cost of Capital of the two firms. Firm WACC АВС 10.6% XYZ 5.2% What is the NPV of the acquisition of XYZ Ltd? O a. $-5.24 million O b. $25.73 million O c. $30.53 million O d. $-9.54 million Clear my choice
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