What is the value of the equity of m corporation

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T Corporation is considering the acquisition of M Corporation. M Corporation generates earnings before interest and tax of $1.75 million a year, and asset replacement cost approximately equals depreciation. Alternative minimum tax is not an issue, there are no synergistic benefits, and cash flows are expected to continue forever and are not expected to grow in the future. Assuming a 20 percent tax rate and a 9 percent after-tax required return, what is net cash flow? Assuming year-end cash flows, what is the value of M Corporation's capital? If M Corporation has long-term debt of $2 million, what is the value of the equity of M Corporation?

Reference no: EM13267505

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