"Our client is a steel producer who wants to expand by acquiring their

competitor. The competitor offers to sell their plant for $$1$M$.$ Should our client

accept the deal at this price or not?"

Please recommend or decline this expansion using the discounted cash flow method using the

following variables:

$-$ Cost of Capital $($discount rate$)=$ current prime interest rate plus three points.

$-$ Depreciable life $=$ ten years

$-$ Yearly net cash flow:

Year $1=$ $$218,500$

Year $2=$ $$224,863$

Year $3=$ $$231,406$

Year $4=$ $$238,136$

Year $5=$ $$245,056$

Year $6=$ $$252,173$

Year $7=$ $$259,491$

Year $8=$ $$267,016$

Year $9=$ $$274,754$

Year $10=$ $$299,515+$ Terminal Value $=$ $$100,000$

Guideline:

By using excel spreadsheet with the following tabs:

$1.$ Cost of Capital calculation

$2.$ Net Present value analysis

$3.$ Internal Rate of Return analysis

$4.$ Your recommendation: why or why not

HINTS:

Spreadsheet format: Four spreadsheet tabs$,$ One file with four individual tabs$.$ Tab #$4$ your

recommendation should be in a text box format, one$-$two paragraphs