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I need the answers to the blue colored cells. Can you please show me how you would calculate the answers using excel, Thank you so
I need the answers to the blue colored cells.
Can you please show me how you would calculate the answers using excel, Thank you so much! Please answer all parts.
Ram Electric Company is being considered for acquisition by Cavalier Electric. Cavalier expects the combination to increase its cash flows by $100,000 for each of the next 5 years and by $125,000 for each of the following 5 years. Ram Electric has relatively high financial leverage; Cavalier expects its cost of capital to be 12% for the first 5 years and estimates that it will increase to 16% for the following 5 years if the merger is undertaken. The cash price of Ram Electric is $325,000. To Do a. Determine the present value of the expected future cash inflows over the next 10 years. b. Calculate the net present value (NPV) for the Ram Electric acquisition. c. All else being equal, would you recommend the acquisition of Ram Electric by Cavalier Electric? Explain Solution a. Determine the present value of the expected future cash inflows over the next 10 years Discount rate 12% Discount rate 2 16% Number of periods Cash inflows 1-5 100,000 125,000 Cash inflows 6-10 PV of cash inflows 1-5 PV of cash inflows 6-10 Present value cash inflows b. Calculate the net present value (NPV) for the Ram Electric acquisition Cash purchase price 325,000 Net present value c. All else being equal, would you recommend the acquisition of Ram Electric by Cavalier Electric? Explain. because the NPV isStep by Step Solution
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