Question
c) Long Island Inc., engaged in the business of manufacturing die casting parts which are used in automobiles is considering to acquire Neil Inc., which
c) Long Island Inc., engaged in the business of manufacturing die casting parts which are used in automobiles is considering to acquire Neil Inc., which is in similar industrial segment but has been struggling for equity infusion which isnt forthcoming, for a sum of USD 300,000/-. Finance team at Long Island expects merger to provide incremental cash flows of about USD 55,000/- a year for 10 years. Cost of capital for this investment is 12% pa. Calculate NPV @ 12% to assess acquisition viability.
d) Assuming that the risk-free rate in Pakistan, RFR=6% and that MRP for a project under consideration at Attock Cement Pakistan is considered to be 5% whereas projects beta coefficient, =2. Calculate the required rate of return on this project.
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