Question
Elif Inc. is analyzing the possible acquisition of BUS321 Inc.. Neither firm has debt. The forecasts of Elif Inc. show that the purchase would increase
Elif Inc. is analyzing the possible acquisition of BUS321 Inc.. Neither firm has debt. The forecasts of Elif Inc. show that the purchase would increase its annual after-tax cash flow by $400,000 indefinitely. The current market value of BUS321 Inc. is $8 million. The current market value of Elif Inc. is $20 million. The appropriate discount rate for the incremental cash flows is 8 percent.
- What is the synergy from the merger? Express in dollars.
- What is the maximum amount that Elif would be willing to pay for BUS320 INC. in a cash acquisition?
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Financial Accounting
Authors: Karen Bird, Gene Imhoff
3rd Edition
0984200541, 9780984200542
