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(Firm X plans to acquire Firm Y. Firm X has yearly after-tax cash flows of RM 80 million, while Firm Y has yearly after-tax cash
(Firm X plans to acquire Firm Y. Firm X has yearly after-tax cash flows of RM 80 million, while Firm Y has yearly after-tax cash flows of RM 35 million. These cash flows are expected to be sustainable perpetually. If the two firms merged, the after-tax cash flow of the combined entity would reach RM 130 million. Using a cost of capital of 10%, what is the value of the target firm to the acquiring firm?)
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