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QUESTION 3 (7 marks) ABC Company is exploring the option to acquire City Manufacturing Limited. City Manufacturing is expected to result in a net profit
QUESTION 3 (7 marks) ABC Company is exploring the option to acquire City Manufacturing Limited. City Manufacturing is expected to result in a net profit of $50,000 from Years 1-3, $70,000 from Years 4-6, $80,000 in Year 7, $90,000, Year 8 $95,000 and $100,000 in Years 9 and 10. Assume r = 7.75% p.a. Required (a) Determine the maximum expected price ABC Company should offer. (b) Discuss at least 4 other factors that needs to be considered apart from price based on time value of money.
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