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Would you recommend the cash acquisition

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Question - ZhenYee Electronics, Inc. is considering the acquisition of Datamatic, Inc. at a cash price of $5,000,000. Datamatic, Inc. has short-term liabilities of $1,500,000. As a result of acquiring Datamatic, Inc., ZhenYee Electronics would also acquire rights to one major patent which would provide an estimated cash inflow of $1,800,000 per year for the next eight years. The firm has a cost of capital of 12 percent. Would you recommend the cash acquisition?

Reference no: EM133029004

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