Beta Corporation is considering the purchase of the linerboard mill and corrugated box plants of Royal Paper for a total price of $250 million. The estimated incremental free cash flows if Beta Corp acquired the facilities can be constructed based on the information presented in the table below. Beta Corp's marginal tax rate is 35% and their after-tax cost of capital is 12%.

(in $ Millions)	1984	1985	1986	1987	1988	1989	1990	1991	1992	1993
EBIAT	10.1	25.6	41.6	35.9	40.2	41.5	49.8	55.6	68.5	70
Depreciation	18.6	28.4	35	36.3	38.3	38.6	29.3	25.4	26.3	26.8
CAPEX	-18.3	-30.5	-41.7	-9.2	-9.2	-9.2	-7.2	-5.7	-6.2	-5.8
NWC	-8	-15	-9	-8	-6	-5	-4	-5	-8	-6
Terminal Value	0	0	0	0	0	0	0	0	0	356.8
Free Cash Flows

Calculate the NPV, IRR, and payback period for the acquisition and indicate what you think Beta Corp. should do.

Answer rating: 100% (QA)

To calculate the Net Present Value NPV Internal Rate of Return IRR and payback period for the acquisition we need to discount the incremental free cas... View the full answer