Question
The company is considering acquiring A for 200000 in cash. The company's cost of capital is 16% primarily due to a high debt position. If
The company is considering acquiring A for 200000 in cash. The company's cost of capital is 16% primarily due to a high debt position. If the acquisition is made, the company expects that its overall cost of capital will be 14% because A is financed mostly with equity. The acquisition is anticipated to generate yearly cash inflows of 28,000 for the next 10 years. What should be the company's decision with regards to A? not acquire A, despite a positive net present value.
A. Acquire A, despite a negative net present value
B. Acquire A, due to a positive net present value
C. Not acquire A, despite a positive net present value
D. Not acquire A, due to a negative net present value
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