To induce the owners of the Axel Company to sell to the Ayala Corporation, an amount was included in the acquisition agreement. Ayala agrees to pay the former owners of Axel P5.00 for every peso of Total Net Income Before Interest and Taxes (NIBIT) earned over P20 million over the next four years. Payment would be made after four years. The total expected NIBIT in the next four years is as follows:

Total NIBIT (won)     Probability

P 5.000.000                  0,20

15.000.000                   0,50

30.000.000                  0,20

35.000.000                    0,10

What is the value of the gain after the acquisition date, assuming a discount rate of 12% (PV factor of 1.57351936)?

Answer rating: 100% (QA)

To calculate the value of the gain after the acquisition date we need to find the present value of t... View the full answer