Question
The CEO of the company you are following has asked you to analyze the possibility of acquiring a smaller business operation from another company. The
The CEO of the company you are following has asked you to analyze the possibility of acquiring a smaller business operation from another company. The purchase will cost $90 million in year zero and will also require $2 million of net working capital. The purchase can be depreciated using a four year straight-line depreciation to $10 million. Assume you can sell the business in four years for $15 million. The new business operation will generate $70 million in revenue each year, which will take $41 million in costs annually. Use the 35% marginal tax rate. (1) Compute the cash flows for the project
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