Water Worx is evaluating a proposal to acquire Plumbing Enterprises for $3 million. Water Worx knows that
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Water Worx is evaluating a proposal to acquire Plumbing Enterprises for $3 million. Water Worx knows that some of Plumbing Enterprises’ redundant assets can be sold for $940,000 immediately after the acquisition. Plumbing Enterprises has a cash balance of $850,000 at the time of the acquisition. Estimates indicate that Water Worx will be able to generate after-tax cash inflows of $290,000 per year for the 6 years after the acquisition. Water Worx has a 12% cost of capital. Should Water Worx make the acquisition? Explain.
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Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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