Cautionary? Tales, Inc., is considering the acquisition of Danger Corp. at its asking price of ?$110,000. Cautionary would immediately sell some of? Danger's assets for ?$11,000 if it makes the acquisition. Danger has a cash balance of ?$1,100 at the time of the acquisition. If Cautionary believes it can generate? after-tax cash inflows of ?$30,000 per year for the next 7 years from the Danger? acquisition, should the firm make the? acquisition? Base your recommendation on the net present value of the outlay using? Cautionary's 9?% cost of capital.
The net present value of the acquisition is