The Charles Corporation desires to expand. It is considering a cash purchase of Atlas Enterprises for $3,000,000. The Atlas Corporation has a $710,000 tax loss carry - forward that could be used immediately by the Charles Corporation, which is paying taxes at the rate of 40 percent. Atlas will provide $410,000 per year in cash flow (aftertax income plus CCA) for the next 16 years. a. If the Charles Corporation has a cost of capital of 12 percent. compute the net present value. (Use a Financial calculator to arrive at the answers. Negative answer should be indicated by a minus sign. Round the final answer to the nearest whole dollar.) Net present value $ b. Should the merger be undertaken? multiple choiceYesNo
The Charles Corporation desires to expand. It is considering a cash purchase of Atlas Enterprises for $3,000,000. The Atlas Corporation has a $710,000 tax loss carry - forward that could be used immediately by the Charles Corporation, which is paying taxes at the rate of 40 percent. Atlas will provide $410,000 per year in cash flow (aftertax income plus CCA) for the next 16 years. a. If the Charles Corporation has a cost of capital of 12 percent. compute the net present value. (Use a Financial calculator to arrive at the answers. Negative answer should be indicated by a minus sign. Round the final answer to the nearest whole dollar.) Net present value $ b. Should the merger be undertaken? multiple choiceYesNo
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 9P
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