Your firm is bidding to buy a technology business in San Jose, California. After conducting a detailed financial and valuation analysis, you believe the firm is worth $20 million. You therefore make a formal offer to their board for $20 million, payable today, in cash. The firm rejects your offer and instead asks for $24 million. Your counteroffer is to pay them $24 million in 3 installments: $12 million in 1 year, $8 million in 2 years, and $4 million in 3 years. This offer is accepted. You have been using a 12% discount rate in your analysis.
a.) How much did you actually pay for the firm in terms of dollars today?
b.) In terms of dollars today, how much more (or less) did you wind up paying for the firm compared with your original offer of $20 million?