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) 1-5 $620,000 58,000 Net present value Years 6-15 $780,000 78,000 16-20 $980,000 88,000 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. Do not round intermediate calculations. Round your answer to 2 decimal places.)
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) 1-5 $620,000 58,000 Net present value Years 6-15 $780,000 78,000 16-20 $980,000 88,000 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. Do not round intermediate calculations. Round your answer to 2 decimal places.)
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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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd33590f2-0c61-41d3-8242-c920b4638ccf%2F8e63e6fe-48d4-4428-a2cb-0e1f4844fd90%2Fn4lf8y_processed.png&w=3840&q=75)
Transcribed Image Text: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
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