Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000. The primary motivation for Tang’s purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax cash flows if Php 2,000,000 per year during the next 5 years. Zang Mining has liabilities of Php9,000,000 and Tang estimates that it can sell the remaining assets Php 6,500,000. Tang will use a 15 percent cost of capital for evaluating the acquisition. Based on this information, what is the net value of the special drilling equipment?
Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000. The primary motivation for Tang’s purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax cash flows if Php 2,000,000 per year during the next 5 years. Zang Mining has liabilities of Php9,000,000 and Tang estimates that it can sell the remaining assets Php 6,500,000. Tang will use a 15 percent cost of capital for evaluating the acquisition. Based on this information, what is the net value of the special drilling equipment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tang Mining is considering the acquisition of Zang Mining at a cash price of Php 6,000,000. The primary motivation for Tang’s purchase of Zang is for a special piece of drilling equipment that it believes will generate after-tax
Note: If your answer is negative, kindly put it in parenthesis. Example: (P1,234,567)
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