Predator Company is considering the acquisition of Prey Company at a cash price of $60,000. Predator has liabilities of $90,000. Prey has a large machine that Predator needs; the remaining assets would be sold to net $65,000. As a result of acquiring the machine, Predator would experience an increase in cash inflow of $20,000 per year over the next 10 years. The firm has a 14% cost of capital. Don't forget to consider time value. What is the effective or net cost of the large machine?

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Heres how to calculate the effective cost of the large machine for Predator Company 1 Initial Cash O... View the full answer