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16. ABC Company just paid $6 million in cash for all 140,000 outstanding shares of XYZ Corp. XYZs stock was recently trading for $30 per
16. ABC Company just paid $6 million in cash for all 140,000 outstanding shares of XYZ Corp. XYZs stock was recently trading for $30 per share. The merger is expected to increase ABC Companys after-tax cash flow by $350,000 per year for the indefinite future. Using a discount rate of 8%, what is ABC Companys gain or loss from this investment?
a. $4,200,000 gain b. $4,375,000 gain c. $1,800,000 loss d. $2,575,000 gain e. $1,800,000 gain
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