You work for Netflix and have been asked to evaluate a potential acquisition of a smaller privately owned competitor. The acquisition candidate produces an EBITDA of 10% of Netflix's EBITDA and is offered to your firm at a price of multiple of 8 times EBITDA. Assume the following:

Current debt costs you 8% and you can raise additional debt at this rate today. The loan is to be amortized over 7 years.

Current return on equity is 15%

Current WACC is 10%

Tax rate is 30% (constant)

80% of the purchase price is considered depreciable assets to be depreciated over ten years on a straight-line basis with no residual values.

Residual value for this operation is to be 2x current EBITDA in year ten.

Create an after-tax cash flow analysis which includes the answer to the following:

a. Economic analysis: is this a fundamentally sound investment?

b. Using the tax cash flows and no debt (pure equity), is the prospect a positive NPV using ROE as the hurdle rate?

c. Using the after tax cash flows and the firms WACC, is this project desirable? Explain how you came to this conclusion.