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Firm A is analyzing the possible acquisition of Firm B. Neither firm has debt. The forecasts of Firm A show that the purchase would increase
Firm A is analyzing the possible acquisition of Firm B. Neither firm has debt. The forecasts of Firm A show that the purchase would increase its annual after tax cash flow by $400,000 indefinitely. The current market value of Firm B is $9,000,000. The current market value of Firm A is $20,600,000. The appropriate discount rate for the incremental cash flows is 8%. Firm A is trying to decide whether it should offer 22% of its stock or $12,400,000 in cash for Firm B. What is the NPV to Firm A if they offer 22% of its stock for Firm B? Round the NPV to firm A to two decimals (e.g. 22.05) and the unit is (\$). Your
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