Compute the net present value

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Reference no: EM132060002

Question

Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.3 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 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	16-25
Cash inflow (aftertax)	$120,000	$140,000	$180,000
Synergistic benefits (aftertax)	17,000	27,000	47,000

The cost of capital for the acquiring firm is 12 percent.

a. Compute the net present value. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Net present value

b. Should the merger be undertaken?

No
Yes

Reference no: EM132060002

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