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CAT ltd is contemplating acquiring RAT Ltd. On successful acquisition, incremental cash flows will as follows YEAR 1-5 CASH FLOW (ShMillions) 2.5 After the fifth

CAT ltd is contemplating acquiring RAT Ltd. On successful acquisition, incremental cash flows will as follows YEAR 1-5

CASH FLOW (ShMillions) 2.5

After the fifth year cash flows are expected to grow at an annual rate of 3 percent forever. If the appropriate discounting rate is 10 percent, how much should CAT Ltd pay in order to acquire RAT LTD.?

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