Question
J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $5,000,000. Patterson will provide the following pattern of cash inflows and
J & J Enterprises is considering a cash acquisition of Patterson Steel Company for $5,000,000. 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) | $540,000 | $700,000 | $900,000 |
| Synergistic benefits (aftertax) | $ 50,000 | $ 70,000 | $ 80,000 |
The cost of capital for the acquiring firm is 15 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 $
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