J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,200,000. Patterson will provide the followingpattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carryforward. Use Appendix D as anapproximate answer, but calculate your final answer using the formula and financial calculator methods.Cash inflow (aftertax)Synergistic benefits (aftertax)1 to 5$ 460,00042,000Years6 to 15$ 620,00062,00016 to 20$ 820,00072,000The cost of capital for the acquiring firm is 11 percent.a. Compute the net present value.Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2decimal places.esNet present valueb. Should the merger be undertaken?YesNo

Cash Flows: The section on cash flows from operating operations provides information on the…

Answered: J & J Enterprises is considering a cash…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 37E

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J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $5,800,000. 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. Cash inflow (aftertax) Synergistic benefits (aftertax) Net present value b. Should the merger be undertaken? 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. Do not round intermediate calculations. Round your answer to 2 decimal places.) Yes 1-5 $620,000 58,000 O No Years 6-15 $780,000 78,000 16-20 $980,000 88,000
How do I create an After tax Cash Flow Analysis? Use rounded answers for subsequent calculations
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(Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Dubois Inc. (a) Dubois Inc. has $600,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $80,000 at the end of each year for 12 years, and the other is to receive a single lump-sum payment of $1,900,000 at the end of the 12 years. Which alternative should Dubois select? Assume the interest rate is constantover the entire investment.(b) Dubois Inc. has completed the purchase of new Dell computers. The fair value of the equipment is $824,150. The purchase agreement specifies an immediate down payment of $200,000 and semiannual payments of $76,952 beginning at the end of 6 months for 5 years. What is the interest rate, to the nearest percent, used in discounting this purchase transaction?(c) Dubois Inc. loans money to John Kruk Corporation in the amount of $800,000. Dubois accepts an 8% note due in 7 years with interest payable…
Beyer Company is considering the purchase of an asset for $240,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Net cash flows Year 0 1 2 3 4 5 Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal place.) $ Cash Inflow (Outflow) (240,000) Year 1 $60,000 Payback period = Year 2 $36,000 Cumulative Net Cash Inflow (Outflow) Year 3 $60,000
Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?
General accounting
Use the information in the table below for the following 5 questions. A capital investment project is estimated to have the following after-tax cash flows, by year: 2 3 4 -$60,000 $20,000 $22,500 $17,500 $25,000 The company utilizes a discount rate of 15% to evaluate capital projects. You may have rounding errors in your calculations so choose the closest answer. Assume cash flows are received equally over the year. The NET PRESENT VALUE for the project shown above is: O-$4,789.25 O $1,150.33 O $0.00 O $204.90 O $1183.65 Click Save and Submit to save and submit. Click Save All Answers to save all answers.
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Use this information for Wyoming Corporation to answer the questions that follow. The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for five years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income fromOperations Net CashFlow 1 $18,750 $93,750 2 18,750 93,750 3 18,750 93,750 4 18,750 93,750 5 18,750 93,750 The present value index for this investment is
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