Case Analysis #2 Your company is looking to expand business operations and has identified a smaller firm for acquisition. You believe that this firm has the potential to grow and become a lucrative addition to your local office. You work with your Finance and Accounting team and determined the following After-Tax Cash Flows:

Year	After Tax Cash Flows
1	(70,600)
2	25000
3	50000
4	85000
5	115000
6	180000
7	190000
8	200000

Q.1 You estimate that the purchase price for this firm would be $200,000 and that additional net working capital would be needed in the amount of $60,000 in year 0.

Q.2 Youve also know that the marketing for the new firm will cost $45,000 in year 0 to publicize the firms expansion.

Q. 3 Your finance manager has indicated that the firm has access to a credit line and could borrow the funds at a rate of 10%. Therefore, he recommends that you use a discount rate of 10% when doing your analysis.

Q.4 At the end of 8 years, the plan is to resell the business. The estimate terminal value is conservatively estimated to be $300,000 of after-tax cash.

Using the data above, calculate the nominal payback, the discounted pay back, net present value, IRR and profitability index for this potential acquisition.