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J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $5,200,000. 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. Years 1–5 6–15 16–20 Cash inflow (aftertax) $560,000 $720,000 $920,000 Synergistic benefits (aftertax) 52,000 72,000 82,000 The cost of capital for the acquiring firm is 14 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.) b. Should the merger be undertaken? No Yes
Financial executives insist that there should be no separation between an individual's personal ethics and his or her business ethics. How do ethics codes apply to project selection and capital budgeting? What are the potential risks to a company of ..
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