Considering the acquisition of company

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Company A is considering the acquisition of Company B at a cash price of 6,000,000. Primary motivation of Company B is if for is flight routes and landing right to Cuba that is believes will generate after-tax cash flows of 2,000,000 per year during the next 5 years. Company B had liabilities of 9,000,000 and Company A estimates that it can sell the remaining assets of 6,500,000. Company A will use a 15% cost of capital for evaluating the acquisition. Using the NPV approach, make a recommendation to management of Company A about this proposal.

Reference no: EM13946805

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