John Ltd is considering the acquisition of Smith Ltd. at a cash price of $1,500,000. The postmerger cash flows attributable to the target company are $198356 starting one year from now, growing in perpetuity at 1.8% per annum. John has decided to discount the cash flows of Smith using a 11.9% cost of capital. What would be the net present value of the merger?

Answer rating: 100% (QA)

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