0 of 10 pts Assignment Score: i0% ( 10 of 100 pes) g the acquisition of Danger C
ID: 2763905 • Letter: 0
Question
0 of 10 pts Assignment Score: i0% ( 10 of 100 pes) g the acquisition of Danger Corp. at its asking price of $120,000 Cautionary would imamediately sell some of Dangers assets for $12,000 if it makes the acquisition. Danger i generate after-tax cash inflows of $30,000 per year for the next 5 years from the Danger acquisition, should the firm make tionary Tales, Inc., is a cash balance of $1,200 a at the time of the acquisition. If Cautionary believes it can generate be net present value of the acquisition isRoand to the nearest dollar.) 5 8Explanation / Answer
Calculation of Net Present value:
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Acquisition Cost
$(120,000.00)
Sale value of Assets of Danger
$ 12,000.00
Cash received
$ 1,200.00
After Tax cash flows
$30,000.00
$30,000.00
$30,000.00
$30,000.00
$30,000.00
Net Cash Flows (CF)
$(106,800.00)
$30,000.00
$30,000.00
$30,000.00
$30,000.00
$30,000.00
PV of $ 1 (11%) (PVF)
1.00000
0.90090
0.81162
0.73119
0.65873
0.59345
PV = CF*PVF =
$(106,800.00)
$27,027.03
$24,348.67
$21,935.74
$19,761.93
$17,803.54
Net Present value = Sum of PVs =
$ 4,077
Calculation of Net Present value:
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Acquisition Cost
$(120,000.00)
Sale value of Assets of Danger
$ 12,000.00
Cash received
$ 1,200.00
After Tax cash flows
$30,000.00
$30,000.00
$30,000.00
$30,000.00
$30,000.00
Net Cash Flows (CF)
$(106,800.00)
$30,000.00
$30,000.00
$30,000.00
$30,000.00
$30,000.00
PV of $ 1 (11%) (PVF)
1.00000
0.90090
0.81162
0.73119
0.65873
0.59345
PV = CF*PVF =
$(106,800.00)
$27,027.03
$24,348.67
$21,935.74
$19,761.93
$17,803.54
Net Present value = Sum of PVs =
$ 4,077
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.