QUESTION $4($a$)$ XYZ Ltd is analysing the possible acquisition of $\backslash ($ A B C $\backslash )$ Group. The current market value of xyz Ltd is K$8$ million and ABC Group Pty Ltd is K$6$ million. It is estimated that the merger will generate a total annual after$-$tax cash flow of K$1$ million. The appropriate discount rate is for the incremental cash flow is $\backslash (10\backslash \%\backslash ).$ Two offers are proposed: $1.$ Offer $\backslash (50\backslash \%\backslash )$ of its shares $2.$ K$6\mathrm{.}5$ million in cash. i$)$ What is the cost of each alternative? ii$)$ What is the NPV of each alternative? iii$)$ Which alternative should XYZ use? iv$)$ Which alternative should $\backslash ($ A B C $\backslash )$ want? $($b$)$ Knab Corporation is considering acquiring Deerson Corporation for K$40,000.$ Deerson has liabilities of K$62,000.$ Deerson has machinery that Knab wants, and the remaining assets would be sold for K$55,000.$ The machinery will furnish Knab with an increase in annual cash flow of $\backslash (\backslash$mathrm$\{$K$\}7,000\backslash )$ for the next $10$ years. The cost of capital is $12$ percent. i$)$ What is the net cost of the machinery? ii$)$ Should the acquisition be made?