=+E182 Water Worx is evaluating a proposal to acquire Plumbing Enterprises for $3 million. Water Worx is

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=+E18–2 Water Worx is evaluating a proposal to acquire Plumbing Enterprises for $3 million.

Water Worx is aware that some of Plumbing Enterprises’ redundant assets can be sold for $940,000 immediately after the acquisition. Plumbing Enterprises has a cash balance of $850,000 at the time of the acquisition. Estimates indicate that Water Worx will be able to generate after-tax cash inflows of $290,000 per year for the 6 years from the acquisition. Water Worx has a 12% cost of capital. Should the company make the acquisition?

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Principles Of Managerial Finance

ISBN: 9781292261515

15th Global Edition

Authors: Chad J. Zutter, Scott Smart

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