Cautionary would immediately sell some of dangers assets


Cautionary Tales, Inc., is considering the acquisition of Danger Corp. at its asking price of $150,000. Cautionary would immediately sell some of Danger's assets for $15,000 if it makes the acquisition. Danger has a cash balance of $1,500 at the time of the acquisition. If Cautionary believes it can generate after-tax cash inflows of $25,000 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 10% cost of capital.

Solution Preview :

Prepared by a verified Expert
Finance Basics: Cautionary would immediately sell some of dangers assets
Reference No:- TGS01488313

Now Priced at $10 (50% Discount)

Recommended (91%)

Rated (4.3/5)