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What is the net present value of the acquisition

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An acquiring firm is analyzing the possible acquisition of a target firm. Both firms have no debt. The acquiring firm believes the acquisition of the target firm will increase its total after-tax annual cash flow by $3.4 million per year forever. The appropriate discount rate for the incremental cash flows is 11 percent. The current market value of the target firm is $95 million, and the current market value of the acquiring firm is $160 million. If the acquiring firm pays $110 million in cash to the target firms shareholders. What is the net present value of the acquisition?

Reference no: EM132722615

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