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SHOW ALL CACULATION STEPS: Carolina has being outsourcing all of its local deliveries to Virginia Inc., small local transportation firm. Now Carolinas management is considering

SHOW ALL CACULATION STEPS:

Carolina has being outsourcing all of its local deliveries to Virginia Inc., small local transportation firm. Now Carolinas management is considering acquisition of Virginia. It is estimated that acquisition will generate annual cost savings of $500,000. For planning purposes you assume these savings will continue forever at this level. If the appropriate discount rate is 4%, what is the offering price that Carolina should make for Virginia Inc.?

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