Question
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.4 million. Medical Labs will provide the following pattern of cash inflows and
Worldwide Scientific Equipment is considering a cash acquisition of Medical Labs for $3.4 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 | |||||||||
15 | 615 | 1625 | |||||||
Cash inflow (aftertax) | $ | 330,000 | $ | 350,000 | $ | 390,000 | |||
Synergistic benefits (aftertax) | 38,000 | 48,000 | 68,000 | ||||||
The cost of capital for the acquiring firm is 11 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.)
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