Question
The company expects total sales revenues of $20 million and a total cost, including tax of $15 million in the forthcoming year. During the subsequent
The company expects total sales revenues of $20 million and a total cost, including tax of $15 million in the forthcoming year. During the subsequent 5 years (e.g., year 2 to year 6), the revenues and costs will increase 25 percent per year, and all profits will be reinvested back into the business. Thereafter, the companys growth will be decreased to only 5 percent per year and the company will need to reinvest only 40 percent of its profits. If the company is offered $75 million in cash by a major competitor, is thus a fair acquisition price, assuming the opportunity cost of capital is 12 percent? Please explain the terms and the decision
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