Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $1.7 million. Medical Labs will provide the following pattern of cash inflows and synergistic benefits for the next 25 years. There is no tax loss carryforward. Use Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

Years

      1–5    6–15 16–25  Cash inflow (aftertax)$160,000 $180,000 $220,000    Synergistic benefits (aftertax)21,000 31,000 51,000

The cost of capital for the acquiring firm is 12 percent.

a. Compute the net present value. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. Should the merger be undertaken?