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A Ltd , may acquire B Ltd . A Ltd . estimates that B Ltd . will provide net income after taxes of Rs .
A Ltd may acquire B Ltd A Ltd estimates that B Ltd will provide net income after taxes
of Rs crores in the first year Rs crores in the second year Rs crores in the third
year, Rs crores in each of the year from fourth
to sixth year and Rs crores annually thereafter onwards. B Ltd requires fresh capital
investment of Rs crores at the end of the first year and depreciation figure for the
first year will be Rs crores. Similarly second year fresh capital investment will be Rs
crores and depreciation will be Rs crores. Third year onwards the fresh
investment and depreciation will stabilize at Rs crores each. The aggregate required
rate of return is percent. Judge the value of acquisition based on the above
information.
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