Considering the acquisition of management theories

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Reference no: EM131072749

Marketing concepts, Inc. is considering the acquisition of management theories, Inc. at a cash price of $1.5 million. Management Theories, Inc. has short-term liabilities of $500,000. As a result of acquiring Management Theories., Marketing Concepts, Inc. would acquire the copyrights to a national best-seller which would provide an estimated cash flow of $300,000 per year for each of the next fine years. The firm has a cost of capital of 20 percent. 1) What is the approximate net present value of this acquisition? 2) How would this amount be used in a purchase for cash? Purchase for stock?

Reference no: EM131072749

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