Compute the adjusted present value

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You are an analyst valuing Palm and Sun Industries for a possible acquisition. Compute the Adjusted Present Value.

The buyer wants cash flows evaluated for 20 years and assumes a terminal value a $50 M to be discounted at 15%. Ignore taxes.

Annual cash flow from continuing operations $ 46 M. Discount at 15%.

Annual cash flow from product line expansion $ 18 M. Discount at 18%.

Annual cash flow from tax savings $ 6 M. The interest rate on debt is 6% and the tax rate is 40%. You do not need to calculate a terminal value for tax savings.

Reference no: EM131453883

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