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EMC would like to acquire Inkomi and is and using the DCF approach for its merger analysis. EMC decided to use the cost of equity
EMC would like to acquire Inkomi and is and using the DCF approach for its merger analysis. EMC decided to use the cost of equity as the discount rate due to the higher level of risk. The cost of equity is 15%. What would be the maximum price EMC is willing to pay for Inktomi ?
2020= 10m
2021= 12 m
2022= 13m
2023= 14m
2024= 15 m
After 2024, the cash flows of Inktomi is expected to grow at a constant growth rate of 5%? Hint: (Use the lecture notes and calculate the NPV)
A) 150m
B) 157.5
C) 145.5 m
D)120 m
E) 42 m
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