J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $4,200,000. Patterson will provide the following pattern of cash inflows and synergistic benefits for the next 20 years. There is no tax loss carry-forward.

	Years
	15	615	1620
Cash inflow (aftertax)	$460,000	$620,000	$820,000
Synergistic benefits (aftertax)	$ 42,000	$ 62,000	$ 72,000

The cost of capital for the acquiring firm is 11 percent.

a. Calculate the net present value. (Use a Financial calculator to arrive at the answers. Negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round the final answer to nearest whole dollar.)

Net present value $

b. Should the merger be undertaken?

multiple choice

• Yes

• No