The financial manager of Company A is evaluating Company B as apossible acquisition. Company B is expected to produce annual after-tax operating cash flows of P500,000. If the merger takes place,Company A will assume P1,250,000 of Company B's long-termliabilities. Company A's weighted average cost of capital is 11% andCompany B's weighted average cost of capital is 14.5%. Theacquisition will be evaluated as a perpetuity. Based on thisinformation, the estimated value of the target company is nearestP3,448,276.P2,198,276.P4,545,455.d.9.a.b.C.P3,295,455.

Acquisition of other company's business is known as business acquisition. Under acquisition, all…

Answered: The financial manager of Company A is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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