Considering the purchase of tangent company


Tapley Acquisition, Inc., is considering the purchase of Tangent Company. The acquisition would require an initial investment of $190,000, but Tapley's after-tax net cash flows would increase by $30,000 per year and remain at this new level forever. Assume a cost of capitl of 15 percent. Should Tapley buy Tangent?

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Accounting Basics: Considering the purchase of tangent company
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